Chapter 5 Flashcards
in a free society, economic decisions are made by
individuals
a means through which sellers and buyers exchange goods
market
signs that are used by consumers and producers to determine how much of a good to buy or sell at a given price and time
market signals
goods that have a life expectancy of less than three years
nondurable goods
goods expected to last at least three years
durable goods
who determines what goods are to be produced and in what quantities in a free market economy
consumers
is characteristic of societies with a very simple economy
traditional economic system
called the planned or directed economy
command economy
shadowy underground systems which people use as an alternative for exchanging goods to avoid governmental regulations
black market
that part of an economy that is controlled by private individuals, businesses, and organizations
private sector
is controlled by national, state, and local governments
public sector
the desire to work to improve one’s economic situation
the reason that a person is willing to trade certain goods for other goods that have greater personal value to him
profit motive
the diminishing of the value of goods that is caused by wear and time
depreciation
the excess of the total revenue paid by buyers for goods over the seller’s total expense for producing those goods
profit
the value of the best alternative that is foregone when a different alternative is taken
opportunity cost
the cost of giving up one opportunity in order to pursue another
opportunity cost
part of the cost of labor
what it would cost people who run their own establishment to hire managers to run the businesses for them
wage of management
the total value of a business minus any liabilities
equity
what remains after all the expenses have been paid
profit
