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Econ. Ch. 2 vocab.
| Question | Answer |
|---|---|
| economic system | way in which a nation uses its resources to satisfy its people’s needs and wants. |
| circular flow of income and output | economic model that pictures income as flowing continuously between businesses and consumers. |
| traditional economy | system in which economic decisions are based on customs and beliefs that have been handed down from generation to generation. |
| command economy | system in which the government controls the factors of production and makes all decisions about their use. |
| market economy | system in which individuals own the factors of production and make economic decisions through free interaction while looking out for their own and their families’ best interests. |
| market | the process of freely exchanging goods and services between buyers and sellers. |
| circular flow of income and output | economic model that pictures income as flowing continuously between businesses and consumers. |
| mixed economy | system combining characteristics of more than one type of economy. |
| capitalism | economic system in which private individuals own the factors of production |
| laissez-faire | economic system in which the government minimizes its interference with the economy. |
| profit | amount earned after a business subtracts its costs from its revenues. |
| profit incentive | desire to make money that motivates people to produce and sell goods and services. |
| competition | rivalry among producers or sellers of similar goods and services to win more business. |
| private property | whatever is owned by individuals rather than by government. |
| economic efficiency | wise use of available resources so as to obtain the greatest benefits possible. |
| economic equity | the attempt to balance an economic policy so that everyone benefits fairly. |
| standard of living | the material well-being of an individual, group, or nation, measured by how well their necessities and luxuries are satisfied. |
| economic growth | expansion of the economy to produce more goods, jobs, and wealth. |
| socialism | a system in which the government owns the major factors of production and attempts to manage output and the distribution of goods. |
| proletariat | term Karl Marx used to refer to workers. |
| communism | term used by Karl Marx for his idealized society in which no government is necessary. |
| democratic socialism | system that works within the constitutional framework of a nation to elect socialists to office; the government usually controls only some areas of the economy. |
| authoritarian socialism | system that supports revolution as a means to overthrow capitalism and bring about socialist goals; the entire economy is controlled by a central government; also called communism. |
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hcmeek
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