Terms : Hide Images
| 213559903 | Private Property | private ownership of capital that gives capitalism its name | |
| 213559904 | Freedom of Enterprise | ensures that entrepreneurs and private businesses are free to obtain and use economic resources to produce their choice of goods and services to sell them in their chosen markets | |
| 213559905 | Freedom of choice | enables owners to employ or dispose of their property and money as they see fit. It also allows workers to enter any line of work for which they are qualified. Finally, it ensures that consumers are free to buy the goods and services that best satisfy their wants | |
| 213559906 | self-interest | motivating force of all the various economic units as they express their free choices | |
| 213559907 | competition | the presence in a market of independent buyers and sellers competing with one another and the freedom of buyers and sellers to enter and leave the market | |
| 213559908 | roundabout production | the construction and use of CAPITAL to aid in the production of CONSUMER goods | |
| 213559909 | specialization | the use of the resources of an individual, a firm, a region or a nation to concentrate production on one or a small number of goods or services | |
| 213559910 | division of labor | specialization of workers | |
| 213559911 | medium of exchange | an item sellers generally accept and buyers use to pay for a good or service; money | |
| 213559912 | barter | the exchange of one good or service for another good or service | |
| 213559913 | money | any item that is generally acceptable to sellers in exchange for goods and services | |
| 213559914 | four fundamental questions | four questions every economy must answer -What to produce -How to produce it -How to divide the total output -How to measure economic flexibility | |
| 213559915 | economic costs | a payment that must be made to obtain and retain the services of a resource | |
| 213559916 | normal profit | the payment made by a firm to obtain and retain entrepreneurial ability | |
| 213559917 | economic profit | total revenue of a firm less its economic costs, "pure profit" | |
| 213559920 | consumer sovereignty | determination by consumers of the types and quantities of goods and services that will be produced with the scare resources of the economy | |
| 213559918 | expanding industry | an industry whose firms earn economic profits and for which an increase in output occurs as new firms enter the industry | |
| 213559919 | declining industry | an industry in which economic profits are negative (losses) and that will decrease its output as firms leave it | |
| 213559921 | dollar votes | the "votes" that consumers and entrepreneurs cast for the production of consumer and capital goods, respectively, when they purchase those goods in product and resource markets | |
| 213559922 | derived demand | the demand for a resource that depends on the demand for the products it helps produce | |
| 213559923 | guiding function of prices | the ability of price changes to bring about changes in the quantities of products and resources demanded and supplied | |
| 213559924 | creative destruction | the hypothesis that the creation of new products and production methods simultaneously destroys the market power of existing monopolies | |
| 213559925 | "insvisible hand" | the tendency of firms and resource suppliers that seek to further their own self-interests in competitive to also promote the interest of society | |
| 213559926 | functional distribution of income | the manner in which national income is divided among the functions performed to earn it | |
| 213559927 | personal distribution of income | the manner in which the economy's | |
| 213559928 | durable goods | a consumer good with an expected life of 3 or more years | |
| 213559929 | nondurable goods | a consumer good with an expected life of less than 3 years | |
| 213559930 | services | an act or use for which a consumer, firm, or government is willing to pay | |
| 213559931 | plant | a physical establishment that performs one or more functions in the production, fabrication, and distribution of goods and services | |
| 213559932 | firm | an organization that employs resources to produce a good or service for profit and owns and operates one or more plants | |
| 213559933 | industry | a group of firms that produce identical or similar products | |
| 213559934 | sole proprietorship | an unincorporated firm owned and operated by one person | |
| 213559935 | partnership | an unincorporated firm owned and operated by two or more persons | |
| 213559936 | corporation | a legal entity chartered by a state or the federal government that is distinct and separate from the individuals who own it | |
| 213559937 | stocks | an ownership share in a corporation | |
| 213559938 | bonds | a financial device through which a borrower (firm or government) is obligated to pay the principal and interest on a loan at a specific date and item | |
| 213559939 | limited liability | restriction of the maximum loss to a predetermined amount for the owners of a corporation. the maximum loss is the amount they payed for the their shares or of stock | |
| 213559940 | double taxation | the taxation of both corporate net income (profits) and the dividends paid from this net income when they become the personal income of the individuals | |
| 213559941 | principal-agent problem | a conflict of interest that occurs when agents (workers/managers) pursue their own objectives to the detriment of the principals(stock holders) goals | |
| 213559942 | monopoly | a market structure in which the number of sellers is so small that each seller is able to influence the total supply and the price of the good or service | |
| 213559943 | spillover costs | a cost imposed without compensation on third parties by the production or consumption of sellers or buyers example: a manufacturer dumps toxic chemicals into a river, killing the fish sought by sport fishers | |
| 213559944 | spillover benefits | a benefit obtained without compensation by third parties from the production or consumption of sellers or buyers example: A beekeeper benefits when a neighboring farmer plants clover | |
| 213559946 | public goods | indivisible; must be produced in such large units that they cannot ordinarily be sold to individual buyers. ex: aircraft carriers, highways, or space telescopes | |
| 213559947 | exclusion principle | buyers who are willing and able to pay the equilibrium price of the product to obtain it, but those who are unable or unwilling to pay are excluded from acquiring the product and it's benefits | |
| 213559949 | free-rider problem | people receive benefits from a good without contributing to its cost | |
| 213559950 | quasi-public goods | education, streets and highways, police and fire protection, libraries and museums, preventative medicine, sewage disposal. goods that could be provided by private firms but are provided by the government | |
| 213559951 | government purchases | exhaustive; the products purchased directly absorb resources and are part of the domestic output ex: missiles absorb engineers/physicists along with steel, explosives, and etc | |
| 213559952 | transfer payments | nonexhaustive; do not directly absorb resources or create output ex: social sceurity benefits, welfare payments, etc | |
| 213559953 | personal income tax | levied on taxable income, kingpin of federal tax system | |
| 213559954 | marginal tax rate | rate at which the tax is paid on each additional unit of taxable income. | |
| 213559955 | average tax rate | total tax paid divided by the total taxable income | |
| 213559956 | payroll taxes | taxes based on wages and salaries ex: social security contributions | |
| 213559957 | corporate income tax | levied on a corps. profit, difference between total revenue and total profit | |
| 213559958 | sales and excise taxes | taxes on commodities or on purchases | |
| 213559959 | property taxes | tax on the value of property | |
| 213559960 | fiscal federalism | the system of transfers (grants) by which the federal government shares its revenues with state and local governments |
