Unit Two Flashcards
Societies face Scarcity
Decisions concerning ‘what,’ ‘how,’ and ‘for whom’ to produce must be made.
Economic System
Is the structure of methods and principles a society uses to produce and distribute goods and services.
Factor Payments
Are the income people receive in return for supplying factors of production - land, labor, and capital.
Profit
Is the amount of money a business receives in excess of its expenses.
Economic Efficiency
Resources are used wisely and that the benefits gained are greater than the costs incurred.
Economic Freedom
The freedom for people to make their own economic decisions, is a goal highly valued in the United States.
Economic Security
A social goal that results in programs to help support the ill, the elderly, and workers who have lost their jobs.
Economic Equity
The social goal that explains why so many people support laws against wage and job discrimination.
Economic Growth
An important goal because populations tend to increase and existing populations tend to want more goods and services.
Innovation
Plays a huge role in economic growth, it’s the process of bringing new methods, products, or ideas into use.
Traditionalist Economies
The oldest and simplest of economic systems is a traditional economy. These reply on habit, custom, ritual to answer the basic questions of econ.
Market
An arrangement that allows buyers and sellers to exchange things.
Specialization
The concentration of the productive efforts of individuals and businesses on a limited number of activities.
Capitalism
Private ownership of the factors of production
Adam Smith
Scottish social philosopher. Published “The Wealth of Nations,” a text that described how markets functioned.
Incentive
Hope of reward or fear of penalty, artificially impact our decision making.
Invisible Hand of the Marketplace
Self interest spurs consumers to purchase certain goods and services and firms to produce them. All of this happens without any central planning or direction.
Socialism
A range of political and economic systems based on the belief that wealth should be evenly distributed throughout society.
Market Socialism
When the government uses its powers of taxation to redistribute wealth and provide services.
Communism
The central government owns and controls all resources and means of production and makes all economic and means of production and makes all economic decisions.
Karl Marx
Father of communism
Laissez Faire
The idea that government should generally not intervene in the marketplace.
Private Property
Property owned by individuals or companies, not government.
Intellectual Property
Protects individuals and their ideas (also known as patents and trademarks).
Mixed Economy
Is an economic system that has some market based elements and some government involvement.
Economic Transition
A period in which a nation moves from one economic system to another.
Privatization
Selling enterprises that were once operated by government to individuals and allowing them to compete in the market.
Private Motive
Drives individuals and businesses to make decisions that improve their material well being.
Open Opportunity
The principle that anyone can compete in the marketplace.
Legal Equality
The principle that everyone has the same legal rights.
Private Property Rights
Give people the right to control their possessions and use them as they wish.
Personal Ownership
Provides an incentive for property owners to use property wisely and conserve resources.
Free Contract
This concept allows people to decide what agreements they want to enter into.
Eminant Domain
The right of the government to take private property for public use. In this transaction the government must pay the person fair market value for their property.
Public Disclosure Laws
Require companies to give consumers important information about the products or services they offer.
Truth-in-Lending Act
Requires businesses offer in loans to disclose certain information to consumers before they sign a loan agreement.
Patent
Gives inventor of a new product the exclusive right to produce and sell a product for 20 years.
Copyright
Grants an author exclusive rights to publish and sell his or her creative works.
Public Good
A shared good or service for which it would be inefficient or impractical to make consumers pay individually.
Free Rider
Someone who would not be willing or does not pay for a certain good or service [through taxation] but gets the benefit of that public good.
Externality
An economic side effect of a good or service that generates benefits or costs to someone other than the person deciding how much to produce or consumer.
Poverty Threshold
An income level below which is needed to support families.
