| market economy | is an economy in which most goods and services are produced by the households (private sector), rather than by the government (public sector), and the prices of goods and services adjust according to the forces of supply and demand |
| command economy | also known as a planned economy, is an economic system in which government controls all or most factors of production and makes all or most production decisions. Countries like the Former Soviet Union, North Korea, and China |
| mixed economy | is an economic system that combines elements of a market economy (capitalism) with elements of a command economy (socialism). |
| cultural values | are those ideas that are considered important to a society that impact the way people behave and influence what choices they make. Which economic system a society embraces depends upon a society's values. |
| standard of living | refers to a measure of a societys economic well-being |
| welfare | refers to the well being of individuals as measured by the number of goods and services each individual has. Social welfare is government aid (in the form of services and money) to the poor... |
| specialize | means to concentrate the productive efforts of individuals and firms on a limited number of activities |
| economic specialization | is when people concentrate their production on fewer kinds of goods and services than they consume |
| division of labor | occurs by dividing a production process into a series of jobs, with each worker focusing on a limited set of tasks; the advantage of division of labor is that each worker can practice and perfect a particular set of skills. |
| mass production | is the manufacture of goods in large quantities by means of machines, standardized design and parts, and, often, assembly lines. |
| interdependance | is a situation in which producers and nations depend on each other because they can't make everything themselves. Since nations can not produce everything they need, nations begin to specialize and trade with others, which lead to economic interdependence. Interdependence is a result of specialization. |
| economic model | is a simplified explanation of how the economy or part of the economy works |
| circular flow diagram | is a simple model of the economy showing flows of goods and services and factors of production between households and firms. |
| households | are the individuals (the average Joe or Mary) in society who own the productive resources, or factors of production, land, labor, and capital. Households are also the consumers of goods and services. |
| firms | are the individual businesses that use the productive resources to produce goods and services. Firms produce goods and services for households in order to receive money. |
| factor market | (also known as the productive resource market) households sell productive resources (land, labor, and capital) to firms. Firms turn to the households to acquire the means to make goods and services, which they then try to sell to consumers in product or output markets. |
| product market | firms or businesses sell finished products to the households. In addition to the household and the product market the circular flow model is sometimes shown with a third section known as the financial capital market." |
| financial capital market | is where the income that is saved (in a bank) flows into the hands of businesses to finance more production or capital goods. the financial capital market supports the theory that it takes money to make money." |
| financial institutions | channel funds from savers to borrowers and investors |
| banking | is a business of accepting deposits (money) from the public, maintaining savings and checking accounts, and issuing loans and credit. |
