Economics
Chapter 3 & 4 Vocabulary Review
Vocabulary Word Definition
the ability of people to make their own economic decisions without interference from the
economic freedom
government
full employment
a condition in which everyone who wants to work can find a job
economic equity
the fairness with which an economy distributes its resources and wealth
economic growth
a condition in which an economy is expanding and producing more and better goods and
the idea that the less fortunate members of society should get the economic support they need
economic security
to live a decent life
economic stability
a condition in which the goods and services people count on are available when they want
economic system
a society’s way of coordinating the production and consumption of goods and services
an economic system in which decisions about production and consumption are based on
traditional economy custom and tradition
an economic system in which decisions about production and consumption are made by a
command economy powerful ruler or government
an economic system in which economic decisions are left up to individual producers and
market economy
consumers
free market economy an economic system in which the workings of the market are not planned or directed
a diagram that shows the circular movement of money, resources, and goods and services
circular flow model among households and producers in an economy
household
a person or a group of people living together
firm
firm: an organization that uses resources to produce and sell goods or services; a business
product market
a market in which firms sell goods and services to households
factor market
a market in which households sell land, labor, and capital to firms
income earned when an individual sells or rents a factor of production that he or she owns; for
factor payment
example, wages are a factor payment made to workers in exchange for their labor
Industrial Revolution a period of rapid industrial growth and development during the 1700s and 1800s
capitalist
an individual investor who accumulates capital, such as machinery, factories, and railroads
capitalism
the free market economic system
a political and economic philosophy based on collective or government ownership of a
socialism
society’s resources and means of production, with the goal of achieving social and economic
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Vocabulary Word
Definition
Chapter
a political and economic system in which all property and wealth is collectively owned by all
communism
members of society; the final stage of socialism in Marxist theory
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the process by which economic decisions are made or influenced by central governments
economic planning rather than by private individuals
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an economic system in which both the government and individuals play important roles in
mixed economy
production and consumption; most modern economies are mixed economies
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public works
government-financed projects such as dams, highways, and bridges
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a government payment to a household or firm for which the payer receives no good or service
transfer payment
in return; examples include Social Security checks and unemployment benefits
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an economic system in which the means of production are mostly privately owned and
free enterprise system operated for profit
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the principle that government should not interfere with the workings of the economy; a French
laissez-faire
term meaning “let them do”
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contract
an agreement between a buyer and a seller
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intellectual property: creations of the mind that have commercial value, such as inventions and
property rights
works of art
3
a legal protection that gives inventors the sole right to make, use, or sell their inventions for a
patent
fixed number of years
3
profit
the money earned by a business after subtracting its operation costs
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specialization
the development of skills or knowledge in one aspect of a job or field of interest
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division of labor
the allocation of separate tasks to different people, based on the principle of specialization
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voluntary exchange the act of willingly trading one item or service for another
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the direct exchange of goods or services without the use of money; a typical feature of
barter
traditional economies
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coincidence of wants a situation in which each of two individuals has something the other wants; the basis for barter
4
a generally accepted medium of exchange that can be traded for goods and services or used to
money
pay debts
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economic
the characteristic of a society in which people rely on others for most of the goods and services
interdependence
they want
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trade barrier
a government measure that limits international trade, such as a protective tariff or an import
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Article I, Section 8 of the U.S. Constitution, which gives Congress the power to regulate
Commerce Clause
interstate trade
4
Vocabulary Word
absolute advantage
comparative
advantage
wealth
mass production
Definition
the condition that exists when someone can produce a good or service using fewer resources
than someone else
the condition that exists when someone can produce a good or service at a lower opportunity
cost than someone else
the total value of all the things a person or a group of people owns
large-scale manufacturing
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