2/27/2013 8:36:00 AM Vocabulary Profit motive- the incentive that drives individuals and business owners to improve their

r material well-being Open opportunity- the principle that anyone can compete in the marketplace Legal equality- the principle that everyone has the same legal rights Private property rights- the principle that people have the right to control their possessions and use them as they wish Free contract- the principle that people may decide what agreements they want to enter into Voluntary exchange- the principle that people may decide what, when, and how they want to buy and sell Interest group- a private organization that tries to persuade public officials to act in ways that benefit its members Patriotism- love of ones country Eminent domain- the right of a government to take private property for public use Public interest- the concerns of society as a whole Public disclosure laws- laws requiring companies to provide information about their products or services Macroeconomics- the study of economic behavior and decisions in a nations whole economy Microeconomics-the study of economic behavior and decisionmaking in small units, such as households and firms Gross domestic product- the dollar value of all final goods and services produced within a countrys borders in a given year Business cycle- a period of macroeconomic expansion, or growth, followed by one of contraction, or decline Referendum- a proposed law submitted directly to the public Obsolescence- situation in which older products and processes become out-of-date Patent- a license that gives the inventor of a new product the exclusive right to sell it for a specific period of time Copyright- a government document that grants an author exclusive rights to publish and sell creative works

Work ethic- a commitment to the value of work Public good- a shared good or service for which it would be inefficient or impractical to make consumers pay individually and to exclude those who did not pay. Public sector- the part of the economy that involves the transactions of the government Private sector- the part of the economy that involves the transactions of individuals and businesses Infrastructure- the basic facilities that are necessary for a society to function and grow Free rider- someone who would not be willing to pay for a certain good or service but who would get the benefits of it anyways if it were provided as a public good Market failure- a situation in which the free market, operating on its own, does not distribute resources efficiently Externality- an economic side effect of a good or service that generates benefits or costs to someone other than the person deciding how much to produce or consume Poverty threshold- an income level below that which is needed to support families or households Welfare- government aid to the poor Cash transfers- direct payments of money by the government to poor, disabled, and retired people In-kind benefits- goods and services provided for free or at greatly reduced prices Grant- a financial award given by a government agency to a private individual or group in order to carry out a specific task

Benefits: 22 million unincorporated businesses in America today. The freedom to tryout your business idea. Profit motive improves the material well being for business to become efficient and productive. Open opportunity is that anyone has a chance to go into business. Legal equality everyone shares legal rights.

Private property rights allows people to use their property and conserve their resources. Voluntary exchange allows people to sell what, how, and when they want. They also have free contract. Role of Consumer Consumer make economic choices. They can also join interest groups to persuade public officials. Consumers Union is a group to protect consumers. Economic Freedom and the Constitution Economic freedom is patriotism. Eminent domain allows the government to take property for fair value. (5th Amendment) The 16th Amendment allows a direct income taxes and congress may levy taxes. The government promotes public interest and public discloser laws of companies. Agencies like the FTC (Federal Trade Commission), FDA (Food and Drug Administration), FED (A federal agent or official, esp. a member of the FBI), OSHA (Occupational Safety and Health Administration), and EPA (Environmental Protection Agency) regulate business. and Stability Micro and Macro Economics households, firms and the nation. A nations economic wellbeing is the GDP gross domestic product The business cycle has changed due to self-interest of consumers. The government tries create public policies to maintain the three goals; high employment, growth and stability Consumers also vote on referendums on local and state economic

Growth

policy. Technology and Productivity Technology boosts productivity like Thomas Edison and Henry Ford. Innovation also leads to obsolescence like telephone operators to cell phones The government also plays a role in federal agencies to fund research and development. The Morril Acts, NASA, and the patent/copyright offices.

The American work ethic is a key ingredient in the nations productivity and economic success. Public Goods Roads, bridges and public schools are examples. Impractical to make consumers individually or exclude those who do not pay. Taxes are collected to pay for public goods and services. The public sector finances the governments transactions. Two cost benefit criteria o The benefit to each individual is less than the cost each would have to pay o Total benefits to society are greater than the cost Creation of Public Goods Through free rider agendas. Through market failures Both of these are examples of externalities or the side effects of goods or services that provides benefits or costs. Positive externalities new schools, bridges, work programs, upgrading your house. Negative externalities higher property taxes, pollution, drives others out of business Safety Nets Welfare for those below the poverty threshold Cash transfers to disabled Americans. In-kind benefits like food stamps and subsidized housing. Medicare, Medicaid, CHIP health insurance for those 65 and older, people unemployed and children. Education local and state along with federal loans and grants.

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2/27/2013 8:36:00 AM