Economic Systems

Vocabulary flashcards covering key definitions, concepts, and market models from the Economic Systems lecture notes.

Economic System

The method used by a society to produce and distribute goods and services, which depends on that society's goals and values.

Three Key Economic Questions

1. What goods and services should be produced? 2. How should these goods and services be produced? 3. Who consumes these goods and services?

Factor Payments

The income people receive for supplying factors of production, such as profits earned by entrepreneurs if their enterprises succeed.

Safety Net

A set of government programs that protect people from experiencing economic hardship.

Standard of Living

The level of economic prosperity, which rises if a country's population is growing.

Traditional Economy

An economic system that relies on habit to decide the answers to the three key economic questions, characterized by little room for innovation, work divided along gender lines, and slow adoption of new technology or radical ideas.

Consumer

Someone who acquires goods and services for his or her own personal use.

Producer

Someone who makes goods or offers services to others.

Market Economy

An economic system where producers are free to decide what to produce, and consumers are free to buy what they want and need.

Incentive

The gain from goods or services that producers offer.

Competition

Producers battling over who can make the most profit.

Command Economy

An economic system where the government decides what will be produced, how much, and the cost.

Mixed Economy

Market-based economic systems in which government plays a limited role, such as owning some property.

Monopoly

A market where a single company or person is the only seller of a specific product or service.

Antitrust Laws

Government rules designed to keep businesses competing fairly and prevent single companies from taking over an entire market.

Federal Trade Commission (FTC)

A US government watchdog agency created in 1914 to protect consumers and keep market competition fair.

Tariffs

A tax that a government puts on goods made in other countries and brought across the border.

Patriotism

The love of one's country.

Economic Systems Spectrum

A continuum ranging from a Pure Planned Economy (such as Communism in North Korea) to a Pure Free Market (with Pure Competition), with Mixed Economies leaning Socialist or Capitalist in between.