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5. Terms to Remember
 
 
Scarcity
a state in which the available quantity of a good is less than the desired quantity at zero price. Sound
 
 
Free Goods
goods whose quantities are sufficient to satisfy all our wants; we can obtain them without any cost. Sound
 
 
Economic Goods
goods whose quantities are insufficient to satisfy all our wants; we obtain them with a cost. Sound
 
 
Choice the act of choosing among options. Sound
 
 
Opportunity Cost the highest-valued option forgone. Sound
 
 
Economic System a society viewed as an economic community. Sound
 
 
Traditional Economy
economy in which the basic economic problems are resolved through the customs and traditions of the community. Sound
 
 
Market Economy
economy in which resources allocation is done by the market forces of demand and supply. Sound
 
 
Planned Economy
economy in which economic decisions are taken by a central planning authority. Sound
 
 
Price Mechanism
also called market mechanism, it is a method of allocating resources through the market forces of demand and supply. Sound
 
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