Economics key terms 2

Economic systems

the structure of methods and principles that a society uses to produce and distribute goods and services

Standard of Living

level of economic prosperity

Free market economy

an economic system in which decisions on the three key economic questions are based on voluntary exchange in markets

Product market

the arena of exchange in which households purchase goods and services from firms

price competition

takes place when producers compete to offer the lowest price for a good that is identical to goods made by other producers

Authoritarian

Governments that limit individuals freedoms & require strict obedience from their citizens

Mixed economy

An economic system that has some government involvement

Microeconomics

The study of economic behaviors in small units

Traditional economy

economic system that relies on habit, custom, or ritual to decide questions of production and consumption of goods and services

non-price competition

a way to attract customers through style, service, or location, but not a lower price

Laissez-faire

the doctrine that government generally should not intervene in the marketplace

interests groups

a private organization that tries to persuade public officials to act in ways that benefit its members

Gross Domestic Product (GDP)

the total value of goods produced and services provided in a country during one year.

Obsolescence

situation in which older products and processes become out-of-date

Market failure

a situation in which the free market, operating on its own, does not distribute resources efficiently

market specialization

focus on one product or a limited ascope of products to become more efficient

incentive

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

Command economy

Another name for a centrally planned economy

Privatization

the process of selling businesses or services operated by the government to individual investors, and then allowing them to compete in the marketplace

externality

an economic side effect of a good or service that generates benefits or costs to someone other than the person deciding how much to produce or consume

factor market

the arena of exchange in which firms purchase the factors of production from households

Socialism

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

intellectual property

creations, such as books, songs, or symbols, that consist of ideas rather than physical objects

profit motive

the incentive that drives individuals and business owners to improve their material well-being

eminent domain

the right of government to take private property for public use

Macroeconomics

the study of economic behaviors & decision making in a nations whole economy

business cycle

a period of macroeconomic expansion followed by a period of contraction

infrastructure

the basic facilities that are necessary for a society to function and grow

poverty threshold

an income level below that which is needed to support families or households

welfare

government aid to the poor

Communism

A political system in which the government owns all property and dominates all aspects of life in a country.