Chapter 2 Flashcards
Economic system
Method by society to produce and distribute goods and services
Factor payment
Income people receive for supplying factors of production
Patriotism
Love of ones country
Safety net
Government programs protect people experiencing unfavorable economic conditions
Standard of living
Level of economic prosperity
Traditional economy
Economic system that relies on habit, custom, or ritual to decide questions of production and consumption of goods and services
Market economy
Economic system in which decisions on production and consumption of goods and services based on voluntary exchange in markets
Centrally planned economy
Economic system in which the central government makes all decisions on production and consumption of goods and services
Command economy
Economic system in which a central authority is in command of the economy
Mixed economy
Market-based economic system with limited government involvement
Market
Arrangement that allows buyers and sellers to exchange things
Specialization
Concentration of the productive efforts of individuals and firms on a limited number of activities
Household
A person or group of people living in the same residence
Firm
Organization uses resources to produce a product then sold
Factor market
Firms purchase the factors of production from household
Profit
The financial gain made in a transaction
Product market
Households purchase the goods and services that firms produce
Self-interest
Ones own personal gain
Incentive
Expectation that encourages people to behave in a certain way
Competition
Struggle among producers for the dollars of consumers
Invisible hand
Term economists use to describe the self-regulating nature of the marketplace
Consumer sovereignty
The power of consumers to decide what gets produced
Socialism
Social and political philosophy based on the belief that democratic means should be used to evenly distribute wealth throughout the society
Communism
Political system characterized by a centrally planned economy with all economic and political power resting in the hands of the central government
Authoritarian
Requiring strict obedience to an authority (dictator)
Collective
Large farm leased from the state to groups of peasant farmers
Heavy industry
Requires a large capital investment and that produces items used in other industries
Laissez faire
Doctrine states that government generally should not intervene in the marketplace
Private property
Owned by individuals or companies not by government or people as a whole
Free enterprise
Economic system characterized by private or corporate ownership of capital goods
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
