Econ: Unit 2 - Economic Systems

Economy or economic system

an organized way of providing for the wants and needs of their people

Traditional economy

the allocation of scarce resources, and nearly all other economic activity, stems from ritual, habit, or custom

command economy

one in which a central authority (gov) makes most of what, how, and for whom questions

Market economy

people and firms act in their own best interests to answer the what, how, and for whom questions

Social security

a federal program of disability and retirement benefits that covers most working people

Inflation

A rise in the general level of prices

Fixed income

and properly income that does not increase even though prices go up

Capitalism

Where private citizens (many of whom are entrepreneurs) own the factors of production

free enterprise

economy in which competition is allowed to flourish with minimum of government interference; term used to describe the American economy

Voluntary exchange

the act of buyers and seller freely and willingly engaging in market transactions

Private property rights

The privilege that entitles people to own and control their possession as they wish

Profit

the extent to which persons or organizations are better off at the end of a period than they were at the beginning

Profit motive

the driving force that encourages people and organizations to improve their material well-being

competition

The struggle among sellers to attract consumers while lowering costs

Consumer sovereignty

Describes the role of the consumer as sovereign, or ruler, of the market

Mixed economy or modified private enterprise economy

Free enterprise market economy where people carry on their economic affairs freely, but are subject to some government intervention and regulation