AP ECONOMICS: Microeconomics: Chapter 2: The Market System and the Circular Flow

A particular set of institutional arrangements and a coordinating mechanism for solving economizing problem; a method of organizing an economy, of which the market system and the command system are the two general types

A method of organizing an economy in which property resources are publicly owned and government uses central planning to direct and coordinate economic activities; command economy; communism

All the product and resource markets of a market economy and the relationship among them; a method that allows the prices determined in those markets to allocate the economy's scarce resources and to communicate and coordinate the decision made by consumers, firms, and resource suppliers

The right of private persons and firms to obtain, own, control, employ, dispose of, and bequeath land, capital, and other property

The freedom of firms to obtain economic resources, to use those resources to produce products of the firms' own choosing, and to sell their products in markets of their choice.

The freedom of owners of property resources to employ or dispose of them as they see fit, of workers to enter any line of work for which they are qualified, and of consumers to spend their incomes in a manner that they think is appropriate

That each firm, property owner, worker and consumer believes is best for itself and seeks to obtain

The presence in a market of independent buyers and sellers competing with with one another along with the freedom of buyers and sellers to enter and leave the market

Any institution or mechanism that brings together buyers (demanders) and sellers (suppliers) of a particular good or service

The use of resources of an individual, a firm, a region, or a nation to concentrate production on one or a small numbers of good and services

The separation of the work required to produce a product into a number of different tasks that are performed by different workers; specialization of workers

Any item sellers generally accept and buyers generally use to pay for a good or service; money; a convenient means of exchanging goods and services without engaging in barter

The exchange of one good or service for another good or service

Any item that is generally acceptable to sellers in exchange for goods and services

Determination by consumers of the types and quantities of goods and services that will be produced with the scarce resources of the economy; consumers' direction of production through their 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

The hypothesis that the creation of new products and production methods simultaneously destroys the market power of existing monopolies

The tendency of firms and resource suppliers that seek to further their own self-interests in competitive markets to also promote the interests of society

An illustration showing the flow of resources from households to firms and of products from firms to households. These flows are accompanied by reverse flows of money from firms to households and from households to firms.

Economic entities (of one or more persons occupying a housing unit) that provide resources to the economy and use the income received to purchase goods and services that satisfy economic wants

Economic entities (firms) that purchase resources and provide goods and services to the economy

An unincorporated firm owned and operated by one person

An unincorporated firm owned and operated by two or more persons

A legal entity ("person") chartered by a state or the Federal government that is distinct and separate from the individuals who own it

A market in which products are sold by firms and bought by households

A market in which households sell and firms buy resources or the services of resources