JA Chp. 1-5
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| Adam Smith | The father of economics. Wrote “Wealth of Nations” which promoted “the invisible hand” theory.
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| Barter | An exchange of goods and services without using money.
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| Benefits | The gains that result when a choice is made.
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| Buying power | The quantity of goods and services a person can buy with a given amount of money.
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| Capital | The buildings, tools, and machines people create and use to produce final goods and services.
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| ceteris paribus | Latin for “all else being equal”; a fundamental assumption in many economic models
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| Command economy | An economic system in which the government holds most property rights.
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| Complementary goods | Products that often are used together.
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| Consumption | The process of using a product or service.
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| Costs | The losses that result when a choice is made.
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| Demand | Quantities of a particular good or service consumers are willing and able to buy at different prices at a particular time.
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| Diminishing marginal utility | The point reached when an additional unit of a product consumed is less satisfying than the one before it.
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| Disincentive | A negative or withdrawn reward.
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| Distribution | The process of getting a product or service to consumers.
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| Economic equity | A condition of economic fairness and impartiality.
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| Economic freedom | A condition in which individuals and businesses have freedom of choice in employment, buying, selling, use of time, and other economically related decisions.
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| Economic growth | A condition in which the output of goods and service in an economy increases over the period of a year.
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| Economic security | A condition in which the basic needs of every person should be met.
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| Economics | A social science that studies how people decide to use scarce resources to satisfy their wants.
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| Entrepreneurship | The imagination, innovative thinking, and management skills needed to start and operate a business.
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| Equilibrium | The price at which the amount supplied is equal to the amount demanded. Market-clearing price
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| Factors of production | The land, labor, and capital resources used to produce goods and services.
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| Free enterprise | The condition that allows people to freely make choices in their economic roles.
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| Full employment | A condition in which almost all people in the labor force are able to find work.
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| Incentive | A positive reward that results from making a choice or behaving in a certain way.
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| Inferior good | A good for which quantity demanded falls as income increases.
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| Labor | The physical and mental efforts people use to create goods and services.
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| Land | Natural resources that are unaltered gifts of nature, such as soil, minerals, timber, and fresh water.
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| Law of demand | An inverse relationship between the quantity demanded and the price of a product.
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| Law of supply | A positive relationship between the quantity supplied and the price of the product.
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| Macroeconomics | The study of the economy as a whole.
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| Marginal | The extra or additional costs or benefits of a decision.
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| Marginal cost | The additional cost of increasing one unit of production.
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| Market | An arrangement that allows buyers and sellers to make exchanges.
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| Market competition | Rivalry among businesses for resources and customers.
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| Market demand | The total of all individual demands in a given market at a particular time.
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| Market economy | An economy that relies on voluntary trade as the primary means of organizing and coordinating production.
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| Market supply | The total of all individual suppliers’ products in a market at a particular time.
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| Market-clearing price | The price at which the amount supplied is equal to the amount demanded. Equilibrium
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| Microeconomics | The study of individual consumers and businesses.
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| Mixed economy | An economic system that blends voluntary exchange, government command, and traditional elements of economic choice-making.
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| Money | Anything that is generally accepted as payment for goods and services.
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| Normal good | A good for which the consumer’s demand increases as income increases.
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| Opportunity cost | The highest valued alternative given up as a result of making a choice.
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| Price ceiling | A price set below equilibrium by the government
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| Price effect | The inclination of people to buy less of something at higher prices than they would buy at lower prices.
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| Price elasticity of demand | A measure of the impact of the price effect.
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| Price floor | A price set above equilibrium by the government
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| Price stability | An economic condition in which prices of goods, services, and resources do not fluctuate significantly, either up or down, in a short period of time.
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| Price system | An arrangement that uses monetary prices as messages to facilitate exchanges between buyers and sellers.
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| Private property | Resources and products owned by individuals or businesses.
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| Production | A process that combines economic resources so the result is a good or service that is available for sale.
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| Profit | A positive difference between total sales and total costs.
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| Public property | Resources and products owned by government.
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| Rationing | Distributing or allocating a product by a price system.
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| Scarcity | An inequality that exists between wants and the resources available to satisfy them.
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| Shortage | The difference between the amount supplied and the amount demanded when the asking price is less than a market-clearing price.
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| Specialization | A process in which businesses and people focus on producing one or a few parts of an entire product.
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| Substitute | A good or service that can replace another good or service.
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| Supply | Quantities of a good or service that producers are willing and able to sell at different prices at a particular time.
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| Surplus | The difference between the amount supplied and the amount demanded when the asking price is greater than a market-clearing price.
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| Trade | Exchanging something for something else.
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| Traditional economy | An economic system in which people rely on traditions or customs to make what, how, and for whom choices.
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| Utility | The usefulness or satisfaction that consumers get from consuming goods and services.
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