Economic Systems Vocabulary

Capitalism – An economic system in which the means of production are privately owned and operated for profit – The world’s most dominant economic model

Socialism – A system in which the people as whole rather than the private individuals own all property and operate all businesses Communism – A form of socialism advocated by Karl Marx – According to Marx, class struggle was inevitable and would lead to the creation of a classless society in which all wealth and property would be owned by the community as a whole

Ideology – A system of thought and belief – Religious, political, economic… Means of Production – the materials, tools, and other instruments used by workers to make products Entrepreneur – A person who assumes financial risk in the hope of making a profit – Someone who opens a business, etc.

Market – A network in which buyers and sellers interact to exchange goods and services for money Invest – To commit money or capital in order to gain a financial return – To put one’s money into a business or a project to make more money Consumer – A person who buys economic goods and services

Profit – The excess of income over all costs – Making money after one has paid all the expenses in a business Incentive – A motivating influence meant to create an action Scarcity – Shortness of supply – human wants will always exceed the resources available to fulfill those wants

Bourgeoisie – The middle class – In Marxist thought: the ruling class in a capitalist society, consisting of capitalists, manufacturers, bankers, and other employers – They own the most important means of production, through which they exploit the working class Proletariat – The wage earning class – In Marxist thought: the class of workers, especially industrial wage earners, who do not possess capital or property and must sell their labor to survive

Competition – Rivalry among individuals in order to acquire more of something that is scarce Monopoly – A market with only one supplier – If there is only one seller, the seller can ask any price for their goods or services Laissez-Faire – Policy allowing businesses to operate with little or no government interference – French: Let people do as they choose

Egalitarian – The equality of all people, especially in political, economic, and social life Utilitarian – The belief that conduct should be directed toward promoting the greatest happiness for the greatest number of persons Totalitarian – A government in which a one party dictatorship regulates every aspect of citizens’ lives Utopia – An ideal/imaginary place – Greek = No place

Command Economy – Supply and price are regulated by the government rather than market forces – Government planners decide which goods and services are produced and how they are distributed – Example: Soviet Union – Also called a Centrally Planned Economy Free Market Economy – Prices and wages are determined by unrestricted competition between businesses – No government regulation or fear of monopolies