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Chapter 2 vocab

Economic system the structure of methods and principles that a society uses to produce and distribute goods and services
Factor payment the income of people receive in return for supplying factors of production
Profit the amount of money a business receives in excess of the expenses
Safety net a set of government programs that protect people who face unfavorable economic conditions
Standard of living level of economic prosperity
Innovation the process of bringing new methods, products, or ideas into use
Traditional economy an economic system that relies on habit, custom, or ritual to decide the three key economic questions
Specialization the concentration of the productive efforts of individuals and businesses of a limited number of activities
Free market economy an economic system in which decisions on the three key economic questions are based on voluntary exchange in markets
Household a person or group of people living in a single residence
Firm an organization that uses resources to produce a product or service, which it then sells
Factor market the arena of exchange in which firms purchase the factors of production from households
Product market the arena of exchange in which households purchase goods and services from firms
Self-interest an individual's own personal gain
Incentive the hope of reward or fear of penalty that encourages a person to behave in a certain way
Competition the struggle among producers for the dollars of consumers
Invisible hand a term coined by Adam Smith to decide the self-regulating nature of the marketplace
Consumer sovereignty the power of consumers to decide what gets produced
Centrally planned economy an economic system in which the government makes all decisions on the three key economic questions
Command economy another name for a centrally planned economy
Socialism a range of economic and political systems based on the belief that wealth should be evenly throughout society
Communism a political system in which the government owns and controls all resources and means of production and makes all economic decisions
Authoritarian describes a form of government that limits individual freedoms and require strict obedience from their citizens
Laissez faire the doctrine that government generally should not intervene in the marketplace
Private property property that is owned by individuals or companies and not by the government or the people as a whole
Mixed economy a market-based economic system in which the government is involved to some extent
Economic transition a period of change in which a nation moves from one economic's system to another
Privatization the process of selling business or services operated by the government to individual investors, and then allowing them to compare in the marketplace
Free enterprise system an economic system characterized by individual or corporate ownership of capital goods
Created by: VKimbrell718
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