Economic System
the method used by a society to produce and distribute goods and servies
Factor Payments
the income people receive for supplying factors of production, such as land, labor, or capital
Safety Net
government programs that protect people experiencing unfavorable economic conditions
Traditional Economy
economic system that relies on habit, custom, or ritual to decide questions of production and consumption of goods and services
Market Economy
economic system in which decisions on production and consumption of goods and services are based on voluntary exchange in markets
Centrally Planned Economy
economic system in which the central government makes all decisions on the production and consumption of goods and services
Command Economy
economic system in which a central authority is in command of the economy; a centrally planned economy
Mixed Economy
market-based economic system with limited government involvement
Specialization
the concentration of the productive efforts of individuals and firms on a limited number of activities
Household
a person or a group of people living in the same residence
Firm
an organization that uses resources to produce a product which it then sells
Factor Market
market in which firms purchase the factors of production form households
Profit
the financial gain made in a transaction
Product Market
the market in which household purchase the goods and services that firms produce
Self-Interest
one's own personal gain
Incentive
an expectation that encourages people to behave in a certain way
Competition
the struggle among producers for the dollars of consumers
Invisible Hand
term economists use to describe the self-regulating nature of the marketplace
Laissez Faire
let them do as they please;" individuals left alone to try to better themselves will produce a multiplication of riches: more jobs and more goods and services; the doctrine that states that government generally should not intervene in the marketplace
Socialism
a social and political philosophy based on the belief that democratic means should be used to evenly distribute wealth throughout a society
Communism
a political system characterized by a centrally planned economy with all economic and political power resting in the hands of the central government
Private Property
property owned by individuals or companies, not by the government or the people as a whole
Free Enterprise
an economic system characterized by private or corporate ownership of capital goods; investments that are determined by private decision rather than by state control; and determined in a free market
Privatization
to sell state-run firms to individuals