Chapter 2 Flashcards
Product Market
The market in which households purchase the goods and services that firms produce
Factor Market
Market in which firms purchase the factors of production from households
Invisible Hand
Term economists use to describe the self-regulating nature of the market place
Consumer Sovereignty
The power of consumers to decide what gets produced
Competition
The struggle among producers for the dollars of consumers
Self-Interest
One’s own gain
Market
An arrangement that allows buyers and sellers to exchange goods and services
Profit
The financial gain made in a transaction
Firm
An organization that uses resources to produce a product, which it then sells
Specialization
The concentration of the productive efforts of individuals and firms on a limited number of activities
Incentive
An expectation that encourages people to behave in a certain way
Household
A person or a group of people living in the same residence
Centrally Planned Economy
Central government makes all decisions
Mixed Economy
Systems that combine tradition and the free market with limited government intervention
Market Economy
Economic decisions are made by individuals and are based on exchange or trade
Factor Payments
The income people receive for supplying factors of production-land, labor, capital, or entrepreneurship
Traditional Economy
Rely on habit, custom, or ritual to decide what to produce, to whom to distribute it to, and how to produce it
Economic System
The method used by a society to produce and distribute goods and services
Safety Net
Set of government programs that protect people experiencing unfavorable economic conditions
Standard of Living
Level of economic prosperity
Socialism
Social and political philosophy based on the belief that democratic means should be used to evenly distribute wealth throughout a society
Communism
Political system characterized by a centrally planned economy with all economic and political power resting in the hands of the government
Authoritarian
Requiring strict obedience to an authority, such as a dictator
Collective
Large farm leased from the state to groups of peasant farmers
Heavy Industry
Industry that requires a large capital investment and that produces items used in other industries
Lasses-Faire
Let it be, doctrine that states that government generally should not intervene in the marketplace, limited government intervention
Free Enterprise
An economic system that permits the conduct of business with minimal government intervention
Continuum
A range with no clear divisions
Transition
Period of change in which an economy moves away from a centrally planned economy toward a market-based system
Privatize
To sell state-run firms to individuals
