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Unit 2

Ch. 2 and 3 Vocabulary

profit motive the force that encourages people and organizations to improve their material well-being.
open opportunity the concept that everyone can compete in the marketplace
legal equality the concept of giving everyone the same legal rights
private property rights the concept that people have the right and privilege to control their possessions as they wish
free contract the concept that people may decide what agreements they want to enter into
voluntary exchange the concept that people may decide what and when they want to buy and sell
competition the rivalry among sellers to attract customers while lowering costs
interest group a private organization that tries to persuade public officials to act or vote according to group members' interests
public disclosure laws laws requiring companies to provide full information about their products
public interest the concerns of the public as a whole
macroeconomics the study of the behavior and decision making of entire economies
microeconomics the study of the economic behavior and decision making of small units, such as individuals families and businesses
gross domestic product (GDP) the total value of all final goods and services produced in a particular economy
business cycle a period of macroeconomic expansion followed by a period of contraction
work ethic a commitment to the value of work and purposeful activity
technology the process used to produce a good or a service
public good a shared good or service for which it would be impractical to make consumers pay individually and to exclude nonpayers
public sector the part of the economy that involves the transactions of the government
private sector the part of the economy that involves the transactions of individuals and businesses
free rider someone who would not choose to pay for a certain good or service, but who would get the benefits of it anyway if it were provided as a public good
market failure a situation in which the market does not distribute resources efficiently
externality an economic side effect of a good or service that generates benefits or costs to someone other that the person deciding how much to produce or consume
poverty threshold an income level below that which is needed to support families or households
welfare government aid to the poor
cash transfers direct payments of money to eligible poor people
in-kind benefits goods and services provided for free or at greatly reduced prices
economic system the method used by a society to produce and distribute goods and services
factor payments the income people receive for supplying factors of production, such as land, labor or capital
patriotism the love of one's country ; the passion that inspires a person to serve his or her country
safety net government programs that protect people experiencing unfavorable economic conditions
standard of living level of economic prosperity
traditional economy economic system that relies on habit, custom or ritual to decide questions of production and consumption of goods and services
market economy economic system in which decisions on production and consumption of goods and services are based on voluntary exchange in markets
centrally planned economy economic system in which the central government makes all decisions on the production and consumption of goods and services
command economy economic system in which a central authority is in command of the economy; a centrally planned economy
mixed economy market-based economic system with limited government involvement
market an arrangement that allows buyers and sellers to exchange things
specialization the concentration of the productive efforts of individuals and firms on a limited number of activities
household a person or group of people living in the same residence
firm an organization that uses resources to produce a product, which it then sells
factor market market in which firms purchase the factors of production from households
profit the financial gain made in a transaction
product market the market in which households purchase the goods and services that firms produce
self-interest one's own personal gain
incentive an expectation that encourages people to behave in a certain way
competition the struggle among producers fro the dollars of consumers
invisible hand term economists use to describe the self-regulating nature of the marketplace
consumer sovereignty the powers of the consumers to decide what gets produced
socialism a social and political philosophy based on the belief that democratic means should be used to evenly distribute wealth throughout a society
communism a political system characterized by a centrally planned economy with all economic and political power resting in the hands of the central government
authoritarian r equiring strict obedience to an authority, such as a dictator
collective large farm leased from the state to groups of peasant farmers
heavy industry industry that requires a large capital investment and that produces items used in other industries
laissez faire the doctrine that states that government generally should not intervene in the marketplace
private property property owned by individuals or companies, not by the government or the people as a whole
free enterprise an economic system characterized by private or corporate ownership of capital goods; investments that are determined by private decision rather than by state control; and determined in a free market
continuum a range with no clear divisions
transition period of change in which an economy moves away from a centrally planned economy toward a market-based system
privatize to sell state-run firms to individuals
Created by: caitlinwasko



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