Section 1

Traditional economy:
Based on custom and tradition
Command economy:Relies on government officials to answer the three basic economic questions.
Market economy:Individuals answer the three basic economic questions.
Market:Free exchange of goods and services is referred as the market.
Self-interest:The impulse that encourages people to fulfill their needs and wants.
Incentives:Something that encourages you to behave in a particular way.
Mixed economy:Combines elements of traditional, market, and command economic models to answer the three basic economic questions.
There are three main types of mixed economies, they are: Authoritarian Socialism, Capitalism, and Communism.
Authoritarian socialism:An economic sytem in which the government owns or controls nearly all factors of production; also known as communism.
Communism:Economic system in which the government owns or controls nearly all factors of production; also know as authoritarian socialism.
Capitalism:Individuals own the factors of production and answer the basic economic questions.
Democratic socialism:The government owns some of the factors of production.
Section 2
Free enterprise:
A system under which business can be conducted freely with little government intervention.
Private Property:Goods that are owned by individuals and by businessess rather than by the government.
Contracts:Individuals also have the right to enter into agreements with one another to buy and sell goods and services.
Competition:The economic rivalry that exist among businessess selling the same or similar products.
Product Market:The exchange of goods and services in the economy.
Resource Market:Represents the exchange of resources between households and business firms and the government, who are the users of the resource.
Income:The money paid to households by the business firms and the government in exchanges for the households' resources.
Section 3
Full employment
:The lowest possible level of unemployment in the economy.
Price stability:Achieved when the overall price level of the goods and services available in the economy is relatively constant.
Standard of living:Refers to the people's economic well-being.

Laissez-faire - "let it be," no government involvement
Labor Theory of Value (Marx) - value in produced goods comes from labor
Surplus Value - difference between total value of production and subsistence wages paid to workers

3 Pure Economic Systems: command, traditional, and market.
3 Mixed Economic Systems: authoritarian socialism, capitalism, and democratic socialism.

Five Main Features of a Free-enterprise System
1. Own private property and enter into contracts.
2. Make individual choices.
3. Engage in economic competition.
4. Make decisions based on self-interest.
5. Participate in the economy with limited government involvement and regulation.

Three Economic Actors in Free-enterprise
1. Producers work to satisfy the needs and wants on consumers.
2. Consumers influence production by purchasing the goods and services.
3. Government oversees and regulates the effects of decisions on the economy as a whole.

Two major economic systems today are free enterprise and socialism.
Adam Smith is associated with self-interest and the "invisible hand"; therefore, he is a supporter of the free enterprise system. Karl Marx was motivated to write the Communist Manifesto because of the distress of extremely poor conditions at the work place for the working class. Marx's ideas are the heart of Socialism and Communism.

Circular Flow Model
the exchange of resources, products, and money payments through U.S economy
Green arrows:
Product market, resouces market, income
ex. money payment, taxes, services, products
Yellow arrows:
Resources Market
ex. resources (labor) moeny payments

U.S. Economic Goals:

There are two types of markets in the circular flow chart.
Product Market and Resources Market
Application to everyday life:

The Mbuti tribe of Central Africa is traditional economy. They travel in small groups and hunt for food themselves in a very secluded environment. The reason that they are a traditional economy is because they have been doing this as a custom from their ancestors before them.
China is an example of a Command Economy. Their government chooses what and where goods are produce for.
The United States would be a good example for a Market Economy. The government really has no say in what companies do with their goods or anything like that. The only time the government would really be able to intrude on what a company is doing, is if a monopoly is formed, or if a business is just doing something extremely bad.

The 5 main features of the Free Enterprise system in the US
  1. Own private property and enter into contracts.
  2. Make individual choices.
  3. Engage in economic competition.
  4. Make dicisions based on self-interest
  5. Participate in the economy with limited government involvement and regulation.