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| 3 Economic questions | What to produce, how to produce, for whom to produce? |
| Economic Equity | the fairness with which an economy distributes its resources and wealth |
| Economic system | a society’s way of coordinating the production and consumption of goods and services |
| Traditional economy | an economic system in which decisions about production and consumption are based on custom and tradition |
| Command economy | an economic system in which decisions about production and consumption are made by a powerful ruler or government |
| Market economy | an economic system in which economic decisions are left up to individual producers and consumers |
| Circular flow model | a diagram that shows the circular movement of money, resources, and goods and services among households and producers in an economy |
| Product market | a market in which firms sell goods and services to households |
| Factor market | a market in which households sell land, labor, and capital to firms |
| Industrial revolution | a period of rapid industrial growth and development during the 1700s and 1800s |
| Capitalists | an individual investor who accumulates capital, such as machinery, factories, and railroads |
| Karl Marx | economist who published The Communist Manifesto, in which they advocated the overthrow of capitalism, where private property and the free market would be replaced with national ownership of industry and more equal distribution of income. |
| Socialism | a political and economic philosophy based on collective or government ownership of a society’s resources and means of production, with the goal of achieving social and economic equality |
| Mixed Economy | an economic system in which both the government and individuals play important roles in production and consumption; most modern economies are mixed economies |
| Laissez-faire | the principle that government should not interfere with the workings of the economy; a French term meaning “let them do” |
| Property rights | the rights of those who own land, buildings, or other goods to use or dispose of their property as they choose |
| Profit motive | closely tied to the incentives-matter principle; profits are our incentive to work or start businesses in the hope of making money for ourselves. |
