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Chapter 2 Econ

Chapter 2 - Economic Systems

The structure of methods and principles that a society uses to produce and distribute goods and services. Economic systems
The income people receive in return for supplying factors of production. Factor payment
The amount of money a business receives in excess of its expenses. Profit
A set of government programs that protect people who face unfavorable economic conditions. Safety net
Level of economic prosperity. Standard of living
The process of bringing new methods, products, or ideas into use. Innovation
An economic system that relies on habit, custom, or ritual to decide the three key economic questions. Traditional economy
Any arrangement that allows buyers and sellers to exchange things. Market
The concentration of the productive efforts of individuals and businesses on a limited number of activities. Specialization
An economic system in which decisions on the three key economic questions are based on voluntary exchange in markets. Free market economy
A person or group of people living in a singe residence. Household
An organization that uses resources to produce a product or service, which it then sells. Firm
The arena of exchange in which firms purchase that factors of production from households. Factor market
The arena of exchange in which households purchase goods and services from firms. Product market
An individual's own personal gain. Self-interest
The hope of reward or fear of penalty that encourages a person to behave in a certain way. Incentive
The struggle among producers for the dollars of consumers. Competition
A term coined by Adam Smith to describe the self-regulating nature of the marketplace. Invisible Hand
The power of consumer to decide what gets produced. Consumer soverignty
An economic system in which the government makes all decisions on the three key economic questions. Centrally planned economies
Another name for a centrally planned economy. Command economy
A range of economic and political systems based on the belief that wealth should be distributed evenly throughout a society. Socialism
A political system in which the government owns and controls all resources and means of production and makes all economic decisions. Communism
Describes a form of government that limits individual freedoms and requires strict obedience from its citizens. Authoritarian
The doctrine that government generally should not intervene in the marketplace. Laissez-faire
Property that is owned by individuals or companies, not by the government or the people as a whole. Private Property
A market-based economic system in which the government is involved to some extent. Mixed economy
A period of change in which a nation moves from one economic system to another. Economic transition
The process of selling businesses or services operated by the government to individual investors, and then allowed them to compete in the marketplace. Privatization
An economic system characterized by private or coroporate ownership of capital goods. Free Enterprise System
Created by: Swader