Economics 2

Mixed Economy

Market-based economic system in which the gov is involved to some extent.

Competition

Struggle among producer for consumer dollars.

Invisible Hand

Term by Adam Smith describing regulating nature of the market place.

Profit

The amount of money a business receives in excess of its expenses.

Factor Market

The arena of exchange in which firms purchase the factors of production from households.

What are the three economic questions every society must answer?

What goods and services should be produced? How should they be made? Who consumes these goods and services?

Authoritarian

Form of gov. that limits the individual freedoms and requires stric obedience from citizens.

Household

A person or group of persons living in a single residence. Own the FoP

Communism

A political system in which government controls and owns all resources and means of production and makes all economic decisions.

Safety Net

A set of government programs that protect people who face unfavorable economic conditions.

Free enterprise system

An economic system characterized by private or corporate ownership of capital goods.

Free Market Economy

An economic system in which decisions are based on voluntary exchange in markets. Also called Capitalist economies.

Centrally Planed Economy

An economic system in which decisions are made by government. AKA Command Economy

Traditional Economy

An economic system that relies on habit,custom, or ritual to decide the three economic questions.

Self-Intrest

An individuals own personal gain.

Firm

An organization that uses resources to produce a product or a service, which it then sells. Transform FoP's into outputs, product or service

Market

Any arrangement of that allows buyers and seller to exchange things.

Product

Arena of exchange in which households purchase goods and services from firms.

Specialization

Concentration of the productive efforts of individuals and businesses on a limited number of activities.

Laissez Faire

Doctrine that gov. generally should not intervene in the market place.

What economic goals do societies peruse?

Efficiency,Freedom, Security, Equity and Growth (FEGGS)

Who are the participants in a free market economy?

Households and firms.

Factor Payment

Income people receive in return for supplying factors of production.

What is needed to produce good and services?

Land, Labor and Capital (Factors of Production)

Standard of living

Level of economic prosperity

Economic Transition

Period of change in which a nation moves from one economic system to another.

Consumer Sovereignty

Power of Consumers to decide what gets produced.

Innovation

Process of bringing new methods, products, or ideas into use.

Privatization

Process of selling business or services operated by the gov to individual investors and then allowing them to compete in the market place.

Private Property

Property owned by individuals or companies not by gov or people as a whole.

Socialism

Range of economic and political systems based on the belief that wealth should be distributed evenly throughout a society.

Incentive

The hope of reward or fear of penalty that encourages a person to behave in a certain way.

Economic System

The structure of methods and principles that a society uses to produce and distribute goods and services.