Economics Chapter 2

  1. economic system
    way in which a nation uses its resources to satisfy its people's needs and wants
  2. traditional economy
    system in which economic decisions are based on customs and beliefs that have been handed down from generation to generation
  3. command economy
    system in which the government controls the factors of production and makes all decisions about their use
  4. market economy
    system in which individuals own the factors of production and make economic decisions through free interaction while looking out for their own and their families' best interests
  5. market
    freely chosen activity between buyers and sellers of goods and services
  6. circular flow of economic activity
    economic model that pictures income as flowing continuously between businesses and consumers
  7. mixed economy
    system combining characteristics of more than one type of economy
  8. capitalism
    economic system in which private individuals own the factors of production
  9. laissez-faire
    economic system in which the government minimizes its interference with the economy
  10. free enterprise system
    economic system in which individuals own the factors of production and decide how to use them within legal limits; same as capitalism
  11. profit
    money left after all the costs of production--wages, rents, interest, and taxes--have been paid
  12. profit incentive
    desire to make money that motivates people to produce and sell goods and services
  13. private incentive
    whatever is owned by individuals rather than by government
  14. competition
    rivalry among producers or sellers of similar goods and services to win more business
  15. economic efficiency
    wise use of available resources so that costs do not exceed benefits
  16. economic equity
    the attempt to balance an economic policy so that everyone benefits fairly
  17. standard of living
    the material well-being of an individual, group, or nation measured by how well their necessities and luxuries are satisfied
  18. economic growth
    expansion of the economy to produce more goods, jobs, and wealth
Card Set
Economics Chapter 2
Terms for my economics class chapter two