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Economics Ch2
| Term | Definition |
|---|---|
| Economic System | A particular set of institutional arrangements and a coordinating mechanism for producing goods and services. |
| Command System | An economic system in which most property resources are owned by the government and economic decisions are made by a central government body. |
| Market System | An economic system in which property resources are privately owned and markets and prices are used to direct and coordinate economic activities. |
| Private property | The rights of persons and firms to obtain, own, control, employ, dispose of, and bequeath land, capital, and other property. |
| Freedom of enterprise | The freedom of firms to obtain economic resources to produce products of the firms’ own choosing, and to sell their products in the market of their choice. |
| Freedom of choice | The freedom of owners of resources to employ or dispose of them as they see fit, and the freedom of consumers to spend their incomes in a manner they think is appropriate. |
| Self-interest | The most-advantageous outcome as viewed by each form, property owner, worker, or consumer. |
| Competition | The presence in a market of independent buyers and sellers vying with one another, and the freedom of buyers and sellers to enter and leave the market. |
| Market | An institution or mechanism that brings buyers and sellers together. |
| Specialization | The use of resources of an individual, region, or nation to produce one or a few goods and services rather than the entire range of goods and services. |
| Division of labor | The separation of the work required to produce a product unto a number of different tasks that are performed by different workers. |
| Medium of exchange | Any item sellers generally accept and buyers generally use to pay for goods and services. |
| Barter | The exchange of one good or service for another good or service. |
| Money | Any item that is generally acceptable to sellers in exchange for goods and services. |
| Consumer sovereignty | Determination by consumers of the types and quantities of goods and services that will be produced with the economy’s scarce resources. |
| Dollar votes | The: votes” that consumers and entrepreneurs cast for the production of consumer and capital goods when the purchase them in product and resource markets. |
| Creative destruction | The idea that the creation of new products methods may simultaneously destroy the market power of existing forms. |
| Circular flow diagram | The flow of resources from household s to firms and of products from firms to households. |
| Resource market | A market in which households sell and forms buy economic resources. |
| Product market | A market in which goods and services (products are sold by firms and bought by households. |
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