market economy
an economic system based on individual choice, voluntary exchange, and the private ownership of resources
free enterprise system
another name for capitalism, an economic system based on private ownership of productive resources. this name is sometimes used because in a capitalist system anyone is free to start a business or enterprise
open opportunity
the ability of everyone to enter and compete in the marketplace of his or her own free choice
legal equality
everyone has the same economic rights under the law
free contract
people must be able to decide for themselves which legal agreements they want to enter into, such as a business, job, or purchase commitments
profit motive
the incentive that encourages people and organizations to improve their material well-being by seeking to gain from economic activities
profit
the money left over after the costs of producing a product are subtracted form the revenue gained by selling that product
modified free enterprise economy
a type of mixed economy which includes some government protections, provisions, and regulations to adjust the free enterprise system
market failure
people who are not part of a marketplace interaction benefit from it or pay part of the costs
public goods
goods and services that are provided by the government and consumed by the public as a group
free rider
a person who chooses not to pay for a good or service but who benefits form it when it is provided
infrastructure
the goods and services that are necessary for the smooth functioning of society
externality
a side effect of transaction that affects someone other than the producer or the buyer
negative externality
an externality that is a negative effect, or cost, for people who were not involved in the original economic activity
positive externality
an externality that is a positive effect, or benefit, for people who were not involved in the original economic activity
subsidy
a government payment that helps cover the cost of an economic activity that is considered to be in the public interest
safety net
government programs designed to protect people form economic hardships
transfer payments
transfer of income form one person or group to another even though the receiver does not provide any goods or services in return
public transfer payment
a payment in which the government transfers income from taxpayers to recipients who do not provide anything in return