| A | B |
|---|
| Traditional Economy | An economy based on custom and tradition. |
| Command Economy | An economy that relies on government officials to answer the three basic economic questions. |
| Market Economy | Individuals answer the three basic economic questions. |
| Market | The free exchange of goods and services. |
| Self-Interest | The impulse that encourages people to fulfill their needs and wants. |
| Incentive | Something that encourages you to behave in a certain way. |
| Mixed Economy | Combines elements of traditional, market, and command economic models to answer the three basic economic questions. |
| Authoritarian Socialism | Mixed economies that are closest to the pure command model. |
| Communism | Also known as authoritarian socialism. |
| Capitalism | Individuals own the factors of production and answer the three economic questions. |
| Democratic Socialism | The government owns some of the factors of production. |
| Free Enterprise | A system under which business can be conducted freely with little government intervention. |
| Private Property | Goods that are owned by individuals and by businesses, rather than by the government. |
| Contracts | The right to enter into agreement with one another to buy and sell goods and services. |
| Competition | The economic rivalry that exists among businesses selling the same or similar products. |
| Product Market | Represents all of the exchange of goods and services in the economy. |
| Resource Market | Represents the exchange of resources between households- individuals like you who own the factors of production (natural, human, and capital resources)- and business firms and the government, who are the users of the resources. |
| Income | The money paid to households by business firms and the government in exchange for households resources. |
| Full Employment | The lowest possible level of employment in the economy. |
| Price Stability | Achieved when the overall price level of the goods and services available in the economy is relatively constant. |
| Standard of Living | Refers to people's economic well-being. |
