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Economics
| Term | Definition | Example |
|---|---|---|
| Allocate | To distribute | |
| Human capital | The knowledge and skills a worker gains through experience & education | |
| Physical capital | Human-made objects used to create goods and services | |
| Opportunity costs | The value of the option not taken when a business makes a decision | |
| Command economy | an economy in which production, investment, prices, and incomes are determined centrally by a government | |
| Consumer sovereignty | the situation in an economy where the desires and needs of consumers control the output of producers | |
| Mixed economy | an economic system that combines elements of both free markets and government control | |
| Incentives | Rewards or penalties that influence's peoples behavior | |
| Traditional economy | in which customs and traditions are more important than money | |
| Free market | an economic system based on supply and demand with little or no government control | |
| U.S. Free Enterprise system | an economic system characterized by private ownership of resources and the means of production | |
| Open opportunity | a principle necessitating equal rights for all individuals to participate or compete in the marketplace | |
| Rivalnousness | a characteristic that describes goods that can't be consumed simultaneously by multiple people or that reduce the ability of others to consume them | if one person eats a cake, there's less cake available for others to eat |
| Common resources | any scarce resource that provides users with tangible benefits but which nobody in particular owns or has exclusive claim to | such as water or pasture |
| Excludability | the degree to which a good, service or resource can be limited to only paying customers, or conversely, the degree to which a supplier, producer or other managing body (e.g. a government) can prevent "free" consumption of a good | producers can prevent some people from consuming the good or service based on their ability or willingness to pay and rivalrous indicates that one person's consumption of a product reduces the amount available for consumption by another |
| Externalities | a side effect or consequence of an industrial or commercial activity that affects other parties without this being reflected in the cost of the goods or services involved | such as the pollination of surrounding crops by bees kept for honey. |
| Market failures | the economic situation defined by an inefficient distribution of goods and services in the free market | when polluters do not have to pay for the pollution they produce. But such market failures or “distortions” can arise from governmental action as well. |
| Negative externality | when the product and/or consumption of a good or service exerts a negative effect on a third party independent of the transaction | a polluter makes decisions based only on the direct cost of and profit opportunity from production and does not consider the indirect costs to those harmed by the pollution |
| Positive externality | a benefit that one party receives indirectly from another party's actions in economics | An individual chooses to walk or bike to work instead of use their own car or a form of public transportation. This helps reduce the amount of pollution in the air, which greatly benefits everyone else |
| Club goods | goods that are non-rivalrous (meaning their use doesn't cause them to be used up), but only to a point | cable television, cinemas, wireless internet, toll roads |
| Safety net | a system to help those who have serious problems and no other form of help | The welfare system was set up to provide a safety net for the poor. |
| Asymmetric Information | when one party in a transaction is in possession of more information than the other | |
| Adverse selection | when sellers have information that buyers do not have, or vice versa, about some aspect of product quality | |
| Subsidy / Subsidize | a type of government expenditure for individuals and households, as well as businesses with the aim of stabilizing the economy | welfare payments and unemployment benefits. The objective of these types of subsidies is to help people who are temporarily suffering economically. |
| "Tragedy of the Commons" | The overuse of commons resources that arises when access to them is not managed | Government intervention is necessary to preserve these common resources so they aren't overused |
Created by:
sourpatchperson
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