ch 3 economy

Profit Motive

The reason people start businesses—to have a better quality of life by making a profit (improving material well-being)

Open Opportunity

Everyone has the chance to start a business or succeed in the marketplace.

free contract

the right to decide what agreements from the contract in which you want to take part

voluntary exchange

the right to decide what products to buy + WHEN you want to buy or sell those products

competition

the rivalry among sellers and producers to attract consumers

legal equality

all should have equal rights

private property rights

the right to control your possessions as you wish

Interest Groups:

members of a private organization who work together to influence government decisions for their shared goals; by persuading public officials to vote according to the interests of the groups’ members.

to make their own economic choices

purpose of free enterprise system for consumers is to give them the freedom to WHAT?

to protect consumers from potential problems of the production of the product OR the product themselves

role of the gvovernment in the free enterprise system is to WHAT?

public disclosure laws and public interest

how does the government try to protect its consumers in the free enterprise system?

public disclosure laws

laws that require businesses to share important information, like prices or product details, to their consumers.

public interest

What is best for the general public or society; involvement efforts of the state and federal government with the public’s concerns; examples are environmental protection or sanitary food production

Public Good

Something everyone can use, like parks, roads, or schools.

Public Sector

The part of the economy run by the government + involves government transactions, like police or public schools; funds public goods

free rider

Someone who benefits from a public good without paying for it.

welfare

Government programs that help people in need, like food assistance or housing support.

Technology:

process involved in producing a good or carrying out a service

business cycle

a period of macroeconomic expansion followed by a period of contraction

protect, stabilize, public goods

3 gov’s roles in the free-enterprise system:

• to ___ consumers

• to __ the economy

• to provide ___ ___.

externality

a good/service’s economic side effect, can generate BENEFITS or COSTS to people NOT in the market (market decides how much to produce and how much to consume)

guns and butter

when governments decide to invest, they have two choices: to invest in national defense or in domestic programs. whatever decision they make, there will be trade-offs.