CHPT 2 Definitions Flashcards
ECONOMIC SYSTEM
The structure of methods and principles that a society uses to produce and distribute goods and services
FACTOR PAYMENT
the income people receive in return for supplying factors of production
PROFIT
the amount of money a business recieves in excesss of its expenses
SAFTEY NET
a set of government programs that protects people from unfavorable economic conditions
STANDARD OF LIVING
level of economic prosperity
INNOVATION
the process of brining new methods, products, or ideas into use
TRADITIONAL ECONOMY
an economic system that relies on habit, custom, or ritual to decide the three economic questions
MARKET
arrangemnet that allows buyers and sellers to exchange things
SPECILIZATION
the concentration of the productive efforts of individuals and businesses on a limited number of activities
FREE MARKET ECONOMY
an economic system in which decisions on the three key economic quiestions are based on voluntary exchange in markets
HOUSEHOLD
a person or group of people living in a single residence
FIRM
an organization that uses resources to produce a product or service, which it then sells
FACTOR MARKET
the arena of exchange in which firms purchase the factors of production of housholds
PRODUCT MARKET
the arena of exchange in which households purchase goods and services from firms
SELF-INTEREST
an individual’s own personal gain
INCENTIVE
the hope of reward or fear of penalty that encourages a person to bahave in a certain way
COMPETITION
the struggle of producers for the dollar of consumers
INVISIBLE HAND
a term coined by Adam Smith to describe the self regulatng nature of the marketplace
CONSUMER SOVEREINGTY
the power of consumers to decide what gets produced
CENTRALLY PLANNED ECONOMY
an economic system in which the government makes all of the key decisions on the three key questions
COMMAND ECONOMY
another name for the centrally planned economy
SOCIALISM
a range of economic and political systems based on wealth should be distributed throughout a society
COMMUNISM
a political system in which the government owns and controls all resources and means of production and makes all economic decisions
AUTHORITARIAN
desciribes a form of govenrmemnt that limits individual freedoms and requires strict obedience from its citizens
