Study Guide 3-4
Economic Equality
The idea that all individuals or households have equal access to resources and wealth. Aimed at reducing wealth gaps and disparities.
Economic Systems
The means by which societies decide on the production, distribution, and consumption of goods and services.
Traditional
Economic decisions are based on customs, beliefs, or religion, often passed down through generations. Example: Tribal communities where roles are defined by tradition.
Command
The government or central authority makes all economic decisions. Example: Soviet Union under communism.
Mixed
Combines elements of both the market and command economic systems. Example: Modern China, Sweden.
Market
Economic decisions are made by individuals in the marketplace. Example: Capitalist countries like the USA.
Factor Payments
Payments to the factors of production, e.g., wages, rent, interest, and profits.
Free Enterprise
An economic system where private businesses operate with little to no interference from the government.
Factors of Production
Resources used in the production of goods and services. Categories include Land, Labor, Capital, Entrepreneurship.
Economic Stability
A scenario where goods, services, and wealth are distributed uniformly across a society's members.
Free Market
A type of market where prices are determined by unrestricted competition between privately owned businesses.
Economic Planning
The process by which a central authority (often government) sets economic goals and priorities.
Property Rights
Laws created by governments in relation to how property can be owned and used.
Specialization
Concentration on a specific area of production.
Division of Labor
Splitting a job into many specialized tasks, each done by a separate individual or group.
Voluntary Exchange
The act of willingly trading one item for another.
Barter
The direct exchange of goods or services without using money.
Money
A medium of exchange, unit of accounting, and store of value.
Economic Interdependence
A reliance on others for goods and services.
Absolute Advantage
The ability of an entity to produce more of a good or service with the same amount of resources as another entity.
Comparative Advantage
The ability of an entity to produce a good or service at a lower opportunity cost than another entity.
Mass Production
The production of large quantities of goods using machinery and often an assembly line.