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Economics
| Term | Definition |
|---|---|
| Economics | The study of how people seek to satisfy their needs and wants by making choices. |
| Scarcity | Lack of enough resources to satisfy all desired uses of those resources Air, food, shelter |
| Needs | Necessary for survival Things such as Air, food, shelter |
| Wants | Items that we desire but that are not essential to survival. |
| Goods | Physical objects such as shoes and shirts. |
| Services | Actions or activities that one person performs for another. |
| Shortage | A situation in which a good or service is unavailable. |
| Disposable Income | Income remaining after deduction of taxes and other mandatory charges, available to be spent or saved as one wishes. |
| Factors of Production | Resource inputs used to produce goods and services such as Land, labor, capital, Entrepreneurship |
| Entrepreneur | Ambitious leaders who combine land, labor and capital to create and market new goods and services. |
| Trade Offs | All the alternatives that we give up whenever we choose one course over another. |
| Gross Domestic Product (GDP) | The total market value of all final goods and services produced within a nation's borders in a given time period |
| Opportunity Cost | The most desired good or services that are forgone to obtain something else |
| 3 Economic Questions | What to produce? How to produce? For whom to produce? |
| Free Market Economy | An arrangement that allows buyers and sellers to exchange things. |
| Invisible Hand Theory | Self-regulating nature of the marketplace. |
| Profit | The financial gain made in a transaction. |
| Competition | The struggle among producers for the dollar of consumers - its the regulating force in free market. |
| Consumer Sovereignty | The power of consumers to decide who gets produced. |
| Command Economy | An economy in which production, investment, prices and incomes are determined centrally by an government. |
| Mixed Economy | An economy that uses both market signals and government directives to allocate goods and resources |
| Capital | Fine goods produced for use in the production of other goods, such as equipment and structures |
| Entrepreneurship | The assembling of resources to produce new or improved products and technologies |
| Production Possibilities | The alternative combination of final goods and services that could be produced in a given time period with all available resources and technology |
| Efficiency | maximum output of a good from the resources used in production |
| Economic Growth | An increase in output (read GDP); an expansion of production possibilities |
| Market Mechanism | The use of market prices and sales to signal desired outputs |
| Laissez Faire | The doctrine of "leave it alone" of non intervention by government in the market mechanism |
| Market Failure | An imperfection in the market mechanism that prevents optimal outcomes |
| Government Failure | Government intervention that fails to improve economic outcomes |
| Macroeconomics | The study of aggregated economic behavior, of the economy as a whole |
| Microeconomics | The study of individual behavior in the economy, of the components of the larger economy |
| Ceteris Paribus | The assumption of nothing else changing |
| Economics | The study of how best to allocate scarce resources among competing uses |
| Human Capital | The knowledge and skills possessed by the workforce |
| Capital-Intensive | Production processes that use a high ratio of capital to labor inputs |
| Productivity | Output per unit of input |
| Externalities | Costs (or benefits) of a market activity borne by a third party |
| Monopoly | A firm that produces the entire market supply of a particular good or service |
| Income Quintile | One-fifth of the population, rank-ordered by income |
| Per Capita GDP | The dollar value of GDP divided by the total population; average GDP |
| Factor Market | Any place where factors of production (land, labor, capital) are bought and sold |
| Product Market | any place where finished good (products) and services are bought and sold |
| Supply | The ability and willingness to sell (produce) specific quantities of a good at alternative prices in a given time period |
| Demand | The ability and willingness to buy specific quantities of a good at alternative prices in a given time period |
| Demand Schedule | A table showing the quantities of a good a consumer is willing and able to buy at alternative prices in a given time period |
| Demand Curve | A curve describing the quantities of a good a consumer is willing and able to buy at alternative prices in a given time period |
| Law of Demand | The quantity of a good demanded in a given time period increases as its price falls |
| Substitute Goods | Goods that substitute for each other when the price of good X rises, the demand for good Y increases |
| Complementary Goods | Good frequently consumed in combination; when the price of good X rises, the demand for good Y falls |
| Shift in demand | a change in the quantity demanded at any (every) given price |
| Market Demand | The total quantities of a good or service people are willing and able to buy at alternative prices in a given time period; the sum of individual demands |
| Market Supply | The total quantities of a good that sellers are willing and able to sell at alternative prices in a given time period |
| Law of Supply | The quantity of a good supplied in a given time period increases as its price increases |
| Equilibrium Price | The price at which the quantity of a good demanded in a given time period equals the quantity supplies |
| Market Mechanism | The use of market prices and sales to signal desired outputs |
| Price Floor | Lower limit set for the price of a good |
| Market Surplus | The amount by which the quantity supplied exceeds the quantity demanded at a give price- excess supply |
| Market Shortage | The amount by which the quantity demanded exceeds the quantity supplied at a given price- Excess demand |
| Price Ceiling | An upper limit imposes on the price of a good |
| Optimal mix of output | The most desirable combination of output attainable with existing resources, technology and social values |
| Private Good | A good or service whose consumption by one person excludes consumption by others |
| Public Good | a good or service whose consumption by one person does not exclude consumption by others |
| Free Rider | an individual who reaps direct benefits from someone else's purchase of a public good |
| Market power | The ability to alter the market price of a good or a service |
| Antitrust | Government intervention to alter market structure or prevent abuse of market power |
| Natural Monopoly | an industry in which one firm can achieve economies of scale over the entire range of market supply |
| Transfer Payments | Payments to individual for which no current good or services are exchanged, like social security, welfare and unemployment benefits |
| Merit good | a good or service society deems everyone is entitled to some minimal quantity of |
| Unemployment | the inability of labor force participants to find fobs |
| Inflation | an increase in the average level of prices of goods and services |
| Progressive Tax | A tax system in which tax rates rise as income rises |
| Proportional tax | a tax that levies the same rate on every dollar of income |
| regressive tax | A tax system in which tax rates fall as income rises |
| Public Choice | Theory of public sector behavior emphasizing rational self interest of decision makers and voters |
| National Income Accounting | The measurement of aggregated economic activity, particularly national income and its components |
| Intermediate goods | Goods or services purchased for use as input in the production of final goods in services |
| Value Added | The increase in the market value of a product that takes place at each stage of the production process |
| Nominal GDP | The value of final output produced in a given period measured in the prices of that period |
| Real GDP | The vale of final output produced in a given period, adjusted for changing prices |
| Base Year | The year used for comparative analysis; the basis for indexing price changes |
| Inflation | An increase in the average level of prices of goods and services |
| Depreciation | the consumption of capital in the production process; the wearing out of plant and equipment |
| Net Domestic Product | GDP less depreciation |
| Investment | Expenditures on new plants, equipment and structures in a given time period plus changes in business inventories |
| Gross investment | total investment expenditure in a given time period |
| Net Investment | gross investment less depreciation |
| Exports | goods and services sold to international buyers |
| imports | goods and services purchased from international sources |
| Net Exports | the value of exports minus the value of imports |
| National Income | Total income earned by current factors of production; GDP less Depreciation plus net foreign factor income |
| Personal Income | Income received by households before payment of personal taxes |
| Disposable income | After tax income of households; personal income less personal taxes |
| Saving | The part of disposable income not spent on current consumption; disposable income less consumption |
| Business cycle | Alternative periods of economic growth and contraction |
| Fiscal policy | The use of government taxes and spending to alter macroeconomics |
| Deflation | A decrease in the average level of prices of goods and services |
| Marginal utility | The change in total utility obtained by consuming one additional unit of a good or service |
| Oligopoly | A market in which a few firms produce all or most of the market supply of a particular good or service |
| Monetary policy | The use of money and credit controls to influence macroeconmic outcomes |
Created by:
Bravehearts