| A | B |
|---|
| economic system | the structure of methods and principles that a society uses to produce and distribute goods and services |
| factor payment | the income people recieve in return for supplying factors of production |
| profit | the amount of money a business receives in excess of its expenses |
| safety net | a set of governmnet 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 economic questions |
| market | any arrangement that allows buyers and sellers to exchange things |
| specialization | the concentration of the productive efforts of individuals and businesses on 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 organizatino 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 describe the self-regulating nature of the marketplace |
| consumer sovereignty | the power of consumers to decide what gets produced |
