Economics Chapter 1 and 2 Test Review

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democratic socialism

government owns some factors of production, individuals can influence government ownership by electing government officials

self-interest

impulse that encourages people to fulfill their own needs and wants

market economy

individuals answer the three economic questions, the government has no say

capitalism

individuals own factors of production and answer three economic questions

natural resources

items provided by nature that can be used to produce goods or services

capital resources

manufactured materials used to create other products

value

relative worth of an item when it is involved in an exchange

command economy

relies on government officials to answer the three economic questions, individuals have little to no say in economic choices

microeconomics

the study of how small economic actors make choices

economics

the study of the choices that people make to satisfy their needs and wants

utility

the usefulness to a person of a good or service

needs

things that are necessary for survival

price stability

when price levels of goods and services the economy are relatively constant

scarcity

when resources are limited and wants or unlimited, is most basic problem of economics because it forces everyone to make choices

opportunity cost

when we choose something, value of good/service that we did not choose (next best alternative)

self-sufficiency

when you can provide all of your own wants and needs without any outside assistance

money

any item that is readily accepted by people in return for goods and services

wants

goods and services that people consume beyond what is necessary for survival

private property

goods owned by individuals or businesses rather than government

authoritarian

"communism", government owns or controls nearly all of the factors of production

services

actions or activities performed for a fee

credit

allows customers to use an item before completing payment for it

traditional economy

based on rituals, habits, laws, and religious beliefs developed by their ancestors

entrepreneurship

combination of organizational abilities and risk taking involved in starting new business or introducing a new product

mixed economy

combines elements of traditional, common, and market economic models

barter

direct trade

allocate

distribute limited resources to satisfy the greatest number of needs and wants

competition

economic rivalry that exists among businesses selling the same or similar products

human Resources

efforts exerted by humans during the production process

economic growth

efforts to increase the amount of goods services produced by each worker in the society

trade-off

one good is sacrificed for another

contracts

oral or written agreements to buy and sell

government

oversees and regulates the decisions of producers and consumers and regulates the effects of these decisions on the economy as a whole

consumers

people who decide to buy things

standard of living

peoples of economic well being

economist

person who studies the economic choices we make

goods

physical objects that can be purchased

voluntary exchange

producers and consumers are free to purchase and sell when terms of trade is acceptable

incentive

something that encourages you to behave in a particular way

free enterprise

system where business can be conducted freely with little government interaction

full unemployment

the lowest possible rate of unemployment

macroeconomics

the study of behaviors on entire economies


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