Lesson 1 Three Key Economic Questions

economic system

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

**Factor payments**

the income people receive in return for supplying factors of production—land, labor, or capital. 

**Profit**

the amount of money a business receives in excess of its expenses.  

**safety net**

set of programs to protect people who face unfavorable economic conditions such as layoffs, injuries, or natural disasters.  

**Innovation**

the process of bringing new methods, products, or ideas into use 

**traditional economy**

relies on habit, custom, or ritual to answer the three basic economic questions.  

**Efficiency**

societies try to maximize what they can produce using the resources they have. If a society can accurately assess what its people need and want, it increases its economic efficiency.

freedom

accept the costs that come with freedom—for example, the potential of failure

security

economic systems seek to reassure people that goods and services will be available when needed and that expected payments will arrive on time.

**growth**

A nation’s economy must grow with its population so it can provide jobs for the new people joining the workforce.