Econ Chap 3 Vocab Terms

Free Enterprise Capitalism

An economic system where private individuals and businesses operate with minimal government intervention, focusing on voluntary exchanges and market-based decisions.

Voluntary Exchange

The act of buyers and sellers freely and willingly engaging in market transactions.

Economic Freedom

The freedom for individuals and businesses to make their own economic decisions, including what to produce, sell, and buy.

Profit Motive

The driving force behind individuals and organizations working to improve their material well-being by earning profits.

Competition

Rivalry among sellers in the marketplace aiming to increase profits, market share, and customer satisfaction.

Market Economy

An economic system where supply and demand guide economic decisions and the allocation of resources.

Consumer Sovereignty

The idea that consumers ultimately decide what products and services are produced through their purchasing decisions.

Efficiency

Using resources in such a way as to maximize the production of goods and services.

Unemployment

The percentage of the labor force that is jobless and actively seeking work.

Price Stability

A goal in which the economy experiences low inflation, leading to consistent prices for goods and services over time.

Full Employment

A situation where all available labor resources are being used in the most economically efficient way.

Economic Growth

An increase in the production of goods and services over time, which is uneven in free enterprise capitalism due to factors like technological change and market fluctuations.

Economic Equity

The concept of fairness in the distribution of wealth and resources within an economy.

Economic Efficiency

The optimal production and allocation of resources, minimizing waste and maximizing output.

Supply-Side Economics

Economic policies designed to increase production by offering incentives to producers, such as tax cuts and deregulation.

Medicare

A government program that provides health insurance to people aged 65 and older.

Mixed Economy

An economic system that incorporates elements of both capitalism and government intervention.

Private Property Rights

The rights of individuals and companies to own and control their own property and use it as they see fit.

Laissez-Faire

An economic philosophy of free-market capitalism that opposes government intervention.

Entrepreneur

A person who organizes and operates a business, taking on financial risks in order to do so, and playing a key role in the growth of free-market economies.

Incentives

Factors that motivate individuals and firms to make decisions in their best interest, such as profits, wages, or benefits.

Demand

The willingness and ability of consumers to purchase goods and services at different prices in a given time period.

Supply

The total amount of a specific good or service available to consumers at various price levels during a given time period.

Monopoly

A market structure where a single seller dominates the market with no close substitutes, often leading to higher prices and less consumer choice.

Regulation

Government intervention in the market, often to protect consumers, promote competition, or ensure ethical business practices.

Market Failure

A situation where the free market does not efficiently allocate resources, often requiring government intervention to correct inefficiencies.

Opportunity Cost

The value of the next best alternative that must be forgone when making a choice, essential to decision-making in a capitalist economy.

Inflation

A general increase in prices and fall in the purchasing value of money, which can impact economic stability and price levels in a free market.

Profit

The financial gain obtained when revenue from selling goods or services exceeds the cost of production.

Invisible Hand

A concept coined by Adam Smith to describe how individuals' self-interested actions can lead to positive economic outcomes for society, as if guided by an unseen force.