Economics Chapter 2

The structures of methods and principles of a society uses to produce and distribute goods and services is _______ ______?

Economic System

What are the 5 economic goals/societal values?

Efficiency, Freedom, Security and Predictability, Equity, and Growth

What are the 4 types of economic systems?

Free Market, Centrally Planned, Mixed, and Traditional

What is a market?

Any arrangement that allows buyers and sellers to exchange things

What is the reason that a market exists?

Markets eliminate the need for any one person to be self-sufficient

What is a free market based on?

It's based on what gets made, how it's made, and how much people can consume of the goods and services produced

What is a person/group of people living in a single residence?

Household

What is an organization that uses resources to produce a product/service which it then sells?

Firm

What are the two things that keep a self-regulating marketplace functioning?

Competition and self-interest

What is a firm's number one incentive?

They seek to make higher profits by increasing sales

What is the "Invisible Hand"?

A term coined by Adam Smith to describe the self-regulating native of the marketplace

What three economic goals/societal values are advantages in a free market economy?

Economic Efficiency, Economic Freedom, and Economic Growth

How is centrally planned economy organized?

It's organized by what items to produce, how to produce them, and who gets them

What is an authoritarian government?

A government that limits individual freedoms and requires strict obedience from their citizens

What is heavy industry?

Heavy industry is the use of large capital investments to make chemical/steel

How does a government work in a FACTOR market?

Government firms purchase land, labor, and capital from households in the factor market

How does a government use taxes collected from households and firms?

They collect taxes from households and firms to provide funds to save a failing industry

What is the organization that uses resources to produce a product or service, which it then sells?

Firm

What is the struggle among producers for the dollars of consumers?

Competition

What is a doctrine that government generally should not intervene in the marketplace?

Laissez faire

What is the amount of money a business receives in excess of its expenses?

Profit

What is a range of economic and political systems based on the belief that wealth should be distributed evenly throughout a society?

Socialism

What is a set of government programs that protect people who face unfavorable economic conditions?

Safety net

What is the concentration of productive efforts on a limited number of activities?

Specialization

What is the power of consumers to decide what gets produced?

Consumer sovereignty

What is the hope of reward or fear of penalty that encourages a person to behave in a certain way?

Incentive