Economics Today & Tomorrow Chapter 2 – Flashcards
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economic system
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way in which a nation uses its resources to satisfy its people's needs and wants.
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traditional economy
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system in which economic decisions are based on customs and beliefs that have been handed down from generation to generation.
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command economy
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system in which the government controls the factors of production and makes all decisions about their use
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market economy
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system in which individuals own the factors of production and make economic decisions through free interaction while looking out for their own and their families best interest.
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market
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the process of freely exchanging goods and services between buyers and sellers
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circular flow of income and output
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economic model that pictures income as flowing continuously between businesses and consumers
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mixed economy
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system of combining characteristics of more than one type of economy
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capitalism
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economic system in which private individuals own the factors of production
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free enterprise system
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economic system in which individuals own the factors of production and decide how to use them within legal limits; same as capitalism
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profit
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amount earned after a business subtracts its cost from its revenues
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laissez-faire
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economic system in which the government minimizes its interference with the economy
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profit incentive
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desire to make money that motivates people to produce and sell goods and services
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competition
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rivalry among producers or sellers of similar goods and services to win more business
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private property
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whatever is owned by individuals rather than by the government
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economic efficiency
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wise use of available resources so as to obtain the greatest benefits possible
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economic equity
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the attempt to balance an economic policy so that everyone benefits fairly
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standard of living
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the material well-being on an individual, group, or nation, measured by how well their necessities and luxuries are satisfied
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economic growth
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expansion of the economy to produce more goods, jobs and wealth
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socialism
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a system in which the government owns the major factors of production and attempts to manage output and the distribution of goods
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proletariat
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term Karl Marx used to refer to workers
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communism
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term used by Karl Marx for his idealized society in which no government is necessary
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democratic socialism
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system that works within the constitutional framework of a nation to elect socialists to office; the government usually controls only some areas of the economy
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authoritarian socialism
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system that supports revolution as a means to overthrow capitalism and bring about socialist goals; the entire economy is controlled by a central government; also called communism
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distribute
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to give out in shares
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incentive
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stimulus; motive
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regulate
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to control according to a rule or principle
