CH2 Microeconomics

Laissez-faire Capitalism

A hypothetical economic system where government’s role is limited to protecting property and enforcing contracts.

Command System

An economic system where the government owns nearly all property and resources and makes decisions about production and distribution.

Market System

An economic system characterized by private ownership and the use of markets to determine production and distribution.

Self-Interest

The driving force in a market system where individuals work for their own economic benefit.

Consumer Sovereignty

The concept that consumers' preferences determine the production of goods and services.

Invisible Hand

A metaphor describing the unintended social benefits resulting from individual actions in a free market.

Circular Flow Model

A model illustrating the flows of resources and products between households and businesses, along with corresponding monetary flows.

Economic Profit

The difference between total revenue and total cost, indicating industry prosperity.

Specialization

The process of focusing on a limited range of goods and services, enabling increased efficiency.

Technological Progress

Improvements in the methods of production or service delivery that increase efficiency and output.