Chapter 2 Section 2- Free market economy
Capitalism
an economic system that is based on private ownership of the factors of production
Incentive
an expectation that encourages people to behave in a certain way
Consumer Sovereignty
consumers decide what gets produced
Profit
financial gain in a transaction
Free Market economy
individuals and businesses use markets to exchange money and products
Invisible Hand
term economists use to describe the self regulating nature of the market place
Households
a person or group living in the same residence
Market
an arrangement that allows buyers and sellers to exchange items
Specialization
is the concentration of the productive efforts of individuals and firms on a limited number of activities
Factor Market
market in which firms purchase the factors of productions from households
Product Market
market in which households purchase the goods and services that firms produce
Self Interest
one's own personal gain
Firms
organizations or businesses
Competition
the struggle among the producers for the dollars of consumers
