Economic Systems Flashcards
Economic System
Method and principles used by a society to produce and distribute goods and services
Factor Payment
Income people receive in return for supplying factors of production, such as land, labor, or capital
Safety Net
Government programs that 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 are based on voluntary exchange in markets
Centrally Planned Economy
Economic system in which the central government makes all decisions on the production and consumption of goods and service
Mixed Economy
Economic system that combines traditional and the free market with limited government involvement
Specialization
Concentration of the productive efforts of individuals and firms on a limited number of activities
Household
Person or group of people living in a single residence
Firm
Organization that uses resources to produce a product or service, which it then sells
Factor Market
Market in which firms purchase the factors or production from the households
Profit
Financial gain made in a transaction
Product Market
Market in which households purchase goods and services that firms produce
Self-Interest
One’s own personal gain
Incentive
Expectation that encourages a person 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 market place
Consumer Sovereignty
Power of consumers to decide what gets produced
Socialism
Social and political philosophy based on the belief that democratic means should be sued 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 central government
Authoritarian
Requiring strict obedience to an authority such as a dictator
Collectve
Large farm leased from the state to groups of peasant farmers
Laissez Faire
Doctrine that state that government generally should not intervene in the marketplace
Free Enterprise
Economic system characterized by private or corporate ownership of capital goods; investments that are determined by private decision rather than by state control; and determined in a free market
Continuim
Range with no clear divisions
Transition
Period of change in which an economy moves from a centrally planned economy to a market-based system
Privatize
To sell state-run firms to individuals
Market
Arrangement that allows buyers and sellers to exchange things
