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Unit 2
Ch. 2 and 3 Vocabulary
| Term | Definition |
|---|---|
| profit motive | the force that encourages people and organizations to improve their material well-being. |
| open opportunity | the concept that everyone can compete in the marketplace |
| legal equality | the concept of giving everyone the same legal rights |
| private property rights | the concept that people have the right and privilege to control their possessions as they wish |
| free contract | the concept that people may decide what agreements they want to enter into |
| voluntary exchange | the concept that people may decide what and when they want to buy and sell |
| competition | the rivalry among sellers to attract customers while lowering costs |
| interest group | a private organization that tries to persuade public officials to act or vote according to group members' interests |
| public disclosure laws | laws requiring companies to provide full information about their products |
| public interest | the concerns of the public as a whole |
| macroeconomics | the study of the behavior and decision making of entire economies |
| microeconomics | the study of the economic behavior and decision making of small units, such as individuals families and businesses |
| gross domestic product (GDP) | the total value of all final goods and services produced in a particular economy |
| business cycle | a period of macroeconomic expansion followed by a period of contraction |
| work ethic | a commitment to the value of work and purposeful activity |
| technology | the process used to produce a good or a service |
| public good | a shared good or service for which it would be impractical to make consumers pay individually and to exclude nonpayers |
| public sector | the part of the economy that involves the transactions of the government |
| private sector | the part of the economy that involves the transactions of individuals and businesses |
| free rider | someone who would not choose to pay for a certain good or service, but who would get the benefits of it anyway if it were provided as a public good |
| market failure | a situation in which the market does not distribute resources efficiently |
| externality | an economic side effect of a good or service that generates benefits or costs to someone other that the person deciding how much to produce or consume |
| poverty threshold | an income level below that which is needed to support families or households |
| welfare | government aid to the poor |
| cash transfers | direct payments of money to eligible poor people |
| in-kind benefits | goods and services provided for free or at greatly reduced prices |
| economic system | the method used by a society to produce and distribute goods and services |
| factor payments | the income people receive for supplying factors of production, such as land, labor or capital |
| patriotism | the love of one's country ; the passion that inspires a person to serve his or her country |
| safety net | government programs that protect people experiencing unfavorable economic conditions |
| standard of living | level of economic prosperity |
| traditional economy | economic system that relies on habit, custom or ritual to decide questions of production and consumption of goods and services |
| market economy | economic system in which decisions on production and consumption of goods and services are based on voluntary exchange in markets |
| centrally planned economy | economic system in which the central government makes all decisions on the production and consumption of goods and services |
| command economy | economic system in which a central authority is in command of the economy; a centrally planned economy |
| mixed economy | market-based economic system with limited government involvement |
| market | an arrangement that allows buyers and sellers to exchange things |
| specialization | the concentration of the productive efforts of individuals and firms on a limited number of activities |
| household | a person or group of people living in the same residence |
| firm | an organization that uses resources to produce a product, which it then sells |
| factor market | market in which firms purchase the factors of production from households |
| profit | the financial gain made in a transaction |
| product market | the market in which households purchase the goods and services that firms produce |
| self-interest | one's own personal gain |
| incentive | an expectation that encourages people to behave in a certain way |
| competition | the struggle among producers fro the dollars of consumers |
| invisible hand | term economists use to describe the self-regulating nature of the marketplace |
| consumer sovereignty | the powers of the consumers to decide what gets produced |
| socialism | a social and political philosophy based on the belief that democratic means should be used to evenly distribute wealth throughout a society |
| communism | a political system characterized by a centrally planned economy with all economic and political power resting in the hands of the central government |
| authoritarian r | equiring strict obedience to an authority, such as a dictator |
| collective | large farm leased from the state to groups of peasant farmers |
| heavy industry | industry that requires a large capital investment and that produces items used in other industries |
| laissez faire | the doctrine that states that government generally should not intervene in the marketplace |
| private property | property owned by individuals or companies, not by the government or the people as a whole |
| free enterprise | an economic system characterized by private or corporate ownership of capital goods; investments that are determined by private decision rather than by state control; and determined in a free market |
| continuum | a range with no clear divisions |
| transition | period of change in which an economy moves away from a centrally planned economy toward a market-based system |
| privatize | to sell state-run firms to individuals |
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caitlinwasko
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