Economic System Vocabulary

1. Economic System – Systems that determine production and consumption of an

area, region or nation

2. Economist – A person who studies systems of production and consumption

(What to produce, how to produce, who are we producing it for? How much are
you producing?)

3. Natural Resources: A valuable, limited material found in nature used in

manufacturing such as wood, coal, and oil.

4. Capital: Money available to invest in business; the tools and technology that is
required to operate business

5. Needs: Things humans need to survive (EX: Food, water, clothing, shelter)

6. Wants: Things people want to have but are not necessary for survival (luxury
items)

7. Means of Production: How something is being made (i.e. by hand, machine,

factory)

8. Interdependence: Relying on another country or nation for a product (Oil from

Middle East) that you cannot provide for yourself

9. Scarcity: Not enough of something (resources) (Too small of a supply)

10. Traditional Economy – Economy based on past practices (ex: farming, hunting
and gathering)

11. Agrarian: A farming or agricultural society

12. Barter System: A system of trade in which goods are exchanged instead of
money

13. Self-sufficient: Relying on oneself to produce everything needed to survive

14. Merchants – People who buy, sell and trade goods for a living

15. Artisans – Skilled workers (ex: blacksmith, carpenter) (CRAFTSMEN/WOMEN)

16. Guilds – Trade association (Union) of craft workers and merchants that sets
standards on prices and quality
17. Joint Stock Companies – A company that sells shares Stock to investors who
share in the profits and losses.

18. Interest Rate: The rate a bank charges for a loan

19. Market Economy: An economy based on free trade and supply and demand.
(businesses and consumers drive)

20. Capitalism: An economic system based on the private ownership of the means of
production and the distribution of goods. (Capital investment by private owners)

21. Free trade: The elimination of trade barriers (tariffs or taxes on imports)
between nations

22. Laissez-faire: Policy allowing business to operate with little or no government

interference (HANDS OFF)

23. Stock: A share of a company

24. Competition: Struggle of producers competing for the money of consumers

25. Entrepreneur: A person who invests money to start his/her own business; A
risk taker

26. Supply - The quantity of goods and services a business makes available at a given
price

27. Demand - The quantity of goods and services that a consumer is willing to pay at
a given price

28. Profit: Financial gain (Money made in business after expenses)

29. Industrialism: Large-scale industry or factories (Mass production of goods

30. Monopolies: Complete control of a product or business by one person or group.

31. Communism: A system of government in which a single, totalitarian, party

holds power. It is characterized by state control of the economy.

32. Command Economy: An economy that is planned and controlled by a central

administration, as in the former Soviet Union. (Economic system for a communist
state)

33. Socialism: Political theory that society as a whole should control the means of
production such as factories and land
34. Nationalization – When the government takes over a farm, business or industry
(ex: Soviet Union)

35. Karl Marx: German political philosopher and writer. He wrote The Communist
Manifesto, which described socialism, which is the basis for modern communism.

36. Proletariat: A term Karl Marx used to describe the working class (Marx
predicted that this class would lead a revolution that would overthrow the
Bourgeoisie); The HAVE NOTS

37. Bourgeoisie – A term Karl Marx used to describe the middle class of society; The
HAVES

38. Mercantilism: Economic system in Europe that wants to have more exports than
imports b/c wealth=power (during the colonial period) (Mother country
benefits)

39. Colony – An area that is subservient to a mother country’s economic needs

40. Favorable Balance of trade – When an area exports more than it imports