Economics Chapter 2 Vocabulary

Front 1

Economic System

Back 1

The method used by a society to produce and distribute goods and services.

Front 2

Factor Payments

Back 2

The income people receive for supplying factors of production, such as land, labor, or capital.

Front 3

Patriotism

Back 3

The love of one’s country; the passion that inspires a person to serve his or her country.

Front 4

Safety net

Back 4

Government programs that protect people experiencing unfavorable economic conditions.

Front 5

Standard of living

Back 5

Level of economic prosperity.

Front 6

Traditional economy

Back 6

Economic system that relies on habit, custom, or ritual to decide questions of production and consumption of goods and services.

Front 7

Market economy

Back 7

Economic system in which decisions on production and consumption of goods and services are based on voluntary exchange in markets.

Front 8

Centrally planned economy

Back 8

Economic system in which the central government makes all decisions on the production and consumption of goods and services.

Front 9

Command economy

Back 9

Economic system in which a central authority is in command of the economy; a centrally planned economy.

Front 10

Mixed economy

Back 10

Market-based economic system with limited government involvement

Front 11

Market

Back 11

An arrangement that allows buyers and sellers to exchange things.

Front 12

Specialization

Back 12

The concentration of the productive efforts of individuals and firms on a limited number of activities.

Front 13

Household

Back 13

A person or group of people living in the same residence.

Front 14

Firm

Back 14

An organization that uses resources to produce a product which it then sells.

Front 15

Factor market

Back 15

Market in which firms purchase the factors of production from households

Front 16

Profit

Back 16

The financial gain made in a transaction.

Front 17

Product market

Back 17

The market in which households purchase the goods and services that firms produce.

Front 18

Self-interest

Back 18

One’s own personal gain.

Front 19

Incentive

Back 19

An expectation that encourages people to behave in a certain way.

Front 20

Competition

Back 20

The struggle among producers for the dollars of consumers.

Front 21

Invisible hand

Back 21

Term economists use to describe the self-regulating nature of the marketplace.

Front 22

Consumer sovereignty

Back 22

The power of the consumers to decide what gets produced.

Front 23

Socialism

Back 23

A social and political philosophy based on the belief that democratic means should be used to evenly distribute wealth throughout a society.

Front 24

Communism

Back 24

A political system characterized by a centrally planned economy with all economic and political power resting in the hands of the central government.

Front 25

Authoritarian

Back 25

Requiring strict obedience to an authority, such as a dictator.

Front 26

Collective

Back 26

Large farm leased from the state to group of peasant farmers.

Front 27

Heavy industry

Back 27

Industry that requires a large capital investment and that produces items used in other industries.

Front 28

Laissez faire

Back 28

The doctrine that states that government generally should not intervene in the marketplace.

Front 29

Private property

Back 29

Property owned by individuals or companies, not by the government or the people as a whole.

Front 30

Free enterprise

Back 30

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.

Front 31

Continuum

Back 31

A range with no clear divisions.

Front 32

Transition

Back 32

Period of change in which an economy moves away from a centrally planned economy toward a market- based system.

Front 33

Privatize

Back 33

To sell state-run firms to individuals.