Unit 1 Essential Vocabulary

Question 1

Economic system characterized by a central authority (government) that makes most of the major economic decisions.

Answer 1

Command Economy

Question 2

Market economy in which privately owned businesses have the freedom to operate for profit with limited government intervention. Also US Economy

Answer 2

Free Market/ Free Enterprise Economy

Question 3

Economic system in which private citizens own and use the factors of production in order to generate profits.
3 Characteristics
1. Open Competition
2. Profit Motive of Produces
3. Private ownership of Property

Answer 3

Capitalism

Question 4

Cost of the next best alternatives use of money, time, or resources, when one choice is made rather than another.

Answer 4

Opportunity Cost

Question 5

Economic a political system in which factors of production are collectively owned and directed by the state (government); a theoretically classless society in which everyone works for a common good.
- No religion
- No government
- No money
- Everyone is socially and economically equal
- Everyone has food, water, and shelter

Answer 5

Communism

Question 6

Risk-taking individuals who introduce new products or services in search of profits; one of the four factors of production.

Answer 6

Entrepreneur

Question 7

Economic system in which government own some factors of production and has a role in determining what and how goods are produced.

Government tries to make everyone socially, politically, and economically equal.

Answer 7

Socialism

Question 8

Metaphor, introduced by the 18th - century Scottish philosopher and economist (Adam Smith), that characterizes the mechanisms through which beneficial social economic outcomes may arise from the accumulated self-interest action of individuals, none of whom intends to bring about such outcomes.

Answer 8

Invisible Hand

Question 9

Economic system that has some combination of traditional command, and market economies; also see modified free enterprise economy. US Economy

Answer 9

Mixed (Market) Economy

Question 10

Fundamental economic problem facing all societies resulting from a combination of scarce (limited) resources and people’s virtually unlimited needs and wants.

Answer 10

Scarcity

Question 11

Productive resources needed to produce goods or services; the four factors are land, capital, labor, and entrepreneurship.

Answer 11

Factors of Production

Question 12

Something that motivates.

Answer 12

Incentives