ECON Chapter 3 Terms

Economic equity

The fairness with witch an economy distributes its resources and wealth.

Economic system

A society’s way of coordinating the production and consumption of goods and services.

Traditional economy

An economic system in which decisions about production and consumption are based on custom and tradition.

Command Economy

An economic system in which decisions about production and consumption are made by a powerful ruler or government.

Market economy

An economic system in which economic decisions are left up to individual producers and consumers.

factor payment

Income earned when an individual sells or rents a factor of production that he or she owns; for example, wages are a factor payment made to workers in exchange for their labour.

mixed economy

An economic system in which both the government and individuals play important roles in production and consumption, most modern economies are mixed economies

free Enterprise system

An economic system in which the means of production are mostly privately owned and operated for profit.

Full Employment

A condition in high everyone who wants to work can find a job.

Firm

An organization that uses resources to produce and sell goods or services; a business.

Factor Market

A market in which households sell land, labour, and capital to firms.

Product Market

A market in which firms sell goods and services to households

Capitalist

An individual investor who accumulates capital, such as machinery, factories, and railroads.

Socialism

A political and economic philosophy based on collective or government ownership of a society’s resources and means of production, with the goal of achieving social and economic equality.

Communism

A political and economic system in which all property and wealth is collectively owned by all members of society, the final stage of socialism in Marxist theory.

Economic Planning

The process by which economic decisions are made or influenced by central governments rather than private individuals.

Public Works

Government-financed projects such as dams, highways, and bridges.

Transfer Payment

A government payment to a household or firm for which the payer receives no good or service in return; examples include Social Security checks and unemployment benefits.

Laissez-faire

The principle that government should not interfere with the workings of the economy; a French term meaning “let them do”.

Intellectual Property

Creations of the mind that have commercial value, such as inventions and works of art.

Patent

A legal protection that gives inventors the sole right to make, use, or sell their inventions for a fixed number of years.

Copyright

A legal protection that gives creators and publishers of books, music, software, and artistic works the sole right to distribute, perform, or display that work.

Profit Motive

The desire to make a profit.