| A | B |
|---|
| Free enterprise | A system under which business can be conducted freely with little government intervention. |
| Private property | Goods that are owned by individuals and businesses rather than the government. |
| Contracts | Individuals have the right to enter into agreements with one another to buy & sell goods and services. |
| Competition | Economic rivalry that exists among businesses selling the same or similar products. It encourages producers to improve what they produce. |
| Voluntary Exchange | When consumers and producers unconditionally purchase and sell products, and they believe the opportunity cost of such a trade is acceptable to both parties. |
| Income | The money paid to households by business firms and the government in exchange for the household’s resources. |
| Product market | Represents all the exchanges of goods and services in the economy. |
| Resource market | Represents the exchange of resources between households (natural, human and capital resources) and business firms and the government who are the users of the resources. |
| Full Employment | The lowest possible level of unemployment in the economy. |
| Price Stability | Is achieved when the overall price level of goods and services available in the economy is constant. |
| Standard of Living | People’s economic well-being. |
| traditional economy | Based on society’s values-its customs and traditions. |
| command economy | Relies on the gov’t officials to answer the 3 economic questions. |
| market economy | Individuals answer the 3 questions. The gov’t has no say. |
| market | Free exchange of goods & services. |
| self-interest | The impulse that encourages people to fulfill their needs and wants. |
| incentive | Something that encourages you to behave in a particular way |
| mixed economy | Combines elements of traditional, market and command economic models to answer the 3 questions. |
| authoritarian socialism | Communism |
| captialism | Individuals own the factors of production and answer the basic economic questions. |
| democratic socialism | Falls between communism and capitalism. The government owns some of the factors of production. In most cases it is limited to key industries. |
