Chapter 2 economics

Households in the economy are defined as_________.

A single person, a family or a group of people who live together.

The primary function of households is to provide __________.

Labor.

The general function of business enterprises is to produce __________.

Goods and services by combining factors of production.

The government aims to create an environment where the economy can operate __________.

Freely and fairly.

The two different types of markets are __________ and __________.

Resource market and product market.

Households sell resources to __________ in the resource market.

Businesses.

The product market is the place where __________ are produced and sold.

Goods and services.

In the circular flow, firms hire labor from the __________ market.

Resource.

The government uses __________ to redistribute resources and address market failures.

Transfer payments.

The command system is characterized by government owning most of the __________ resources.

Property.

The market system is also referred to as __________.

Capitalism.

In a market system, economic decisions are primarily directed by __________ and __________.

The market and the prices.

Property rights in a market system encourage the maintenance and improvement of __________.

Property.

Competition in a market system prevents the potential abuse of __________.

Economic power.

Money is a __________ that facilitates trade in the economy.

Medium of exchange.

The invisible hand promotes efficiency by ensuring that resources are used for products in __________.

Demand.

Consumer sovereignty determines which goods and services can be __________.

Produced.

The command system faced insurmountable problems due to the __________ problem.

Coordination.

Incentives in the market system encourage __________ and innovation.

Learning of new skills.

The demise of the command system was partly due to a lack of __________ for innovation.

Incentives.

Firms in a market system seek to earn a profit by supplying __________ that are in demand.

Goods and services.