Economics Handbook Vocabulary Economic System The way in which a nation uses its resources to satisfy peoples needs and wants. Scarcity the economic problem of having unlimited human wants in a world of limited resources. Traditional Economic System An economic system is which social roles and culture determine how goods are made, sold, and bought. Market Economic System An economic system based on individual choices and voluntary trade. Command Economic System An economic system is which the government owns some or all of the factors of production. Mixed Economy An economy that has features of more than one of the economic systems. Trade Barrier Any law or practice that a government uses to limit free trade between countries. Embargo A type of trade barrier in which a government places restrictions on the import or export of certain goods. Embargoes often are backed by military force. Quota A limit on the amount of a product that may be imported during a given period of time. Tariff A fee charged for goods or services brought into a state or country from another state or country. Free Trade Zone An exchange of goods without the use of tariffs or quotas within a certain boundary (European Union) Currency Money in any form that is accepted as a medium of exchange, but especially paper money. Exchange Rate The amount of one currency that can be purchased for a given unit of another. Physical Capital Resources such as factories, machinery, and tools that people use to make other goods. Human Capital The knowledge and skills that allow workers to produce goods and services and earn an income. Standard of Living refers to the level of wealth, comfort, material goods and necessities available in a certain area. Literacy Rate the ability to read and write at a specified age in a country. Gross Domestic Product (GDP) is the monetary value of all the finished goods and services produced within a country's borders. Natural Resources Raw materials that are used to support life and make goods. Entrepreneur Someone who brings together land, labor, and capital goods to produce goods and services.