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Econ Unit 2 Systems
Ch. 2 Sect 1-2
Question | Answer |
---|---|
the structure that society uses to produce and distribute goods and services (answer the 3 questions) | economic system |
What goods and services should society produce? How should these goods and services be produced? Who consumes these goods and services? | Three economic questions |
the income people receive in return for supplying land, labor and capital | factor payment |
the amount of money a business keeps after all costs of production have been paid | profit |
a set of government programs that are designed to protect people who face economic hard times | safety net |
way of living that is usual for a person, community or country | standard of living |
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 - the oldest and simplest economic system | traditional economy |
a place that allows buyers and sellers to exchange things | market |
when individuals and businesses do only what they are best at | specialization |
an economic system in which decisions on the three economic questions are based on voluntary exchange | free market economy |
a person or group of people living in the same place together | household |
a business that uses resources to produce a product or service for sale | firm |
an exchange in which firms purchase the factors of production from households | factor market |
an 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 contest between firms or people to sell goods and services | competition |
Adam Smith's idea that competition should regulate the marketplace | invisible hand |
the power of consumers to decide what gets produced | consumer sovereignty |
the money a person makes | income |
a model that shows the process of exchanges between households and firms | circular-flow |