| 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 receive 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 government programs that protect people who face unfavorable economic conditions |
| innovation | the process of bringing new methods, products, or ideas into use |
| standard of living | level of economic prosperity |
| traditional economy | an economic system that relies on habit, custom, or ritual to decide the three key 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 organization 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 service 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 |
| centrally planned economy | an economic system in which the government makes all decisions on the three key economic questions |
| command economy | another name for a centrally planned economy |
| socialism | wealth should be distributed evenly throughout a society |
| communism | government owns and controls all resources and means of production and makes economic decisions |
| authoritarian | form of government that limits individual freedoms and requires strict obedience from its citizens |
| laissez faire | doctrine that government generally should not intervene in the marketplace |
| private property | owned by individuals or companies, not by the government or the people as a whol |
| mixed economy | market-based economic system in which the government is involved to some extent |
| economic transition | a period of change in which a nation moves from one economic system to another |
| privatization | process of selling government business or services to individual investors to compete in the marketplace |
| free enterprise system | economic system characterized by private or corporate ownership of capital goods |
