20 terms

Chapter 2: Economic Systems

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Three Economic Questions
What goods/services will be produced, how they will be produced, and how they will be distributed.
Economic System
A nation's plan fo answering the key economic questions.
Custom-Based Economy
Goods are produced the way they always have been produced.
Traditional
Type of economic system most likely found in third-world countries.
Directed Economy
Resources are owned and controlled by the government.
Directed
Type of economic system that can also be called a Planned Economy.
Planned
Type of economic system related to a communist government.
Market Economy
Individuals are free to engage in business transactions with buyers who are willing and able to buy and sellers who supply goods and services from which they earn a profit.
Marketplace
Any place where buyers and sellers exchange goods, services, and some form of money.
Capitalism
An economic system in which most economic resources are privately owned and decisions are largely made by free exchange in the marketplace.
Private Enterprise
The right of an individual to choose whether to own a business, what business to enter, and what to produce with only limited government direction. Equivalent to capitalism.
Voluntary Exchange
Buyers and sellers make their own decisions to determine the price of goods and services.
Business
An establishment or enterprise that supplies us with goods and services in exchange for payment of some form.
Private Property
You own, use, or dispose of things of value.
Profit
Money left from sales after subtracting all the costs of operating the business.
Profit Motive
The desire to work hard and be creative to earn a higher profit.
Competition
The rivalry among businesses to sell their goods and services to buyers.
Freedom of Choice
The right to buy where and what you please, to organize with other workers, to travel.
Mixed Economic Systems
The combination of government ownership and control of basic industries with some private ownership or consumer-goods.
Market
The economic system associated with democratic governments.
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