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101 Cards in this Set
- Front
- Back
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Scarcity
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The condition that results from society not having enough resources to produce all the things people would like to have
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Economics
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The study of how people try to satisfy what appears to be seemingly unlimited and competing wants through the careful use of relatively scarce resources
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Need
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A basic requirement for survival and includes food, clothing and shelter
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Want
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A way of expressing a need
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Factors of Production
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Resources required to produce the things we would like to have and include land, capital, labor, and entrepreneurs
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Land
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Natural resources not created by humans
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Capital
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The tools, equipment, machinery, and factories used in the production of goods and services
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Financial capital
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The money used to buy the tools and equipment used in production
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Labor
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People will all their efforts, abilities, and skills
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Entrepreneur
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A risk-taker in search of profits who does something new with existing resources
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Production
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The process of creating goods and services
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Gross Domestic Product
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The dollar value of all final goods and services, and structures produced within a country's borders in a 12-month period
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Economic Products
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Goods and services that are useful, relatively scarce, and transferable to others
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Good
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An item that is economically useful or satisfies sn economic want, such as a book, car, or compact disc player
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Consumer Good
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Intended for final use by individuals
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Capital Goods
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Goods that are used to produce other goods and services
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Service
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Work that is performed for someone
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Value
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A worth that can be expressed in dollars and cents
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Paradox of value
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A situation where some necessities, such as water, have little monetary value, whereas some non-necessities, such as diamonds, have a much higher value.
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Utility
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The capacity to be useful and provide satisfaction
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Wealth
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The accumulation of those products that are tangible, scarce, useful, and transferable from one person to another
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Market
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A location or other mechanism that allows buyers and sellers to exchange a certain economic product
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Factor Markets
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The markets where productive resources are bought and sold
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Product Markets
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The markets where producers sell their goods and services to consumers
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Economic Growth
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Occurs when a nation's total output of goods and services increases over time
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Productivity
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A measure of the amount of output produced by a given amount of inputs in a specific period of time
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Division of Labor
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When work is arranged so that individual workers do fewer tasks than before
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Specialization
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When factors of production perform tasks that they can do relatively more efficiently than others
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Human Capital
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The sum of the skills, abilities, health, and motivation of people
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Economic Interdependence
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People rely on each other to provide the goods and services they consume.
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Trade-offs
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Alternative choices
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Opportunity Cost
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The cost of the next best alternative use of money, time, or resources when one choice is made rather than another.
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Production Possibilities Frontier
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A diagram representing various combinations of goods and/or services an economy can produce when all productive resources are fully employed
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Cost-benefit Analysis
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A way of thinking about a problem that compares the costs of an action to the benefits received
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Free Enterprise Economy
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One in which consumers and privately owned businesses, rather than the government, make the majority of the What, How, and For Whom decisions.
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Standard of Living
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The quality of life based on the possession of the necessities and luxuries that make life easier.
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Economic System
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An organized way of providing for the wants and needs of other people
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Traditional Economy
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The allocation of scarce resources, and nearly all other economic activity, stems from ritual, habit, or custom
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Command Economy
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A central authority makes most of the what, how, and for whom decisions.
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Market Economy
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People and firms act in their own best interests to answer the what, how, and for whom questions
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Social Security
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A federal program of disability and retirement benefits that covers most working people
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Inflation
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A rise in the general level of prices
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Fixed Income
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An income that does not increase even though prices go up
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Capitalism
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Where private citizens, many of whom are entrepreneurs, own factors of production
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Free enterprise
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Another term used to describe the American Economy
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Voluntary Exchange
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The act of buyers and sellers freely and willingly engaging in market transactions
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Private Property Rights
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The privilege that entitles people to own and control their possessions as they wish
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Profit
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The extent to which persons or organizations are better off at the end of a period than they were at the beginning
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Profit Motive
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The driving force that encourages people and organizations to improve their material well-being
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Competition
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The struggle among sellers to attract consumers while lowering costs
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Consumer Sovereignty
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The rold of the consumer as soverign, or ruler, of the market
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Mixed Economy
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An economy in which people carry on their economic affairs freely, but are subject to some government intervention and regulation
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Demand
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The desire, ability, and willingless to buy a product
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Microeconomics
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Area of economics that deals with behavior and decision making by small units, such as individuals and firms
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Demand Schedule
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A listing that shows the various quantities demanded of a particular product at all prices that might prevail in the market at a given time
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Demand Curve
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A graph showing the quantity demanded at each and every price that might prevail in the market
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Law of Demand
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States that the quantity demanded of a good or service varies inversely with its price
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Market Demand Curve
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The demand curve that shows the quantities demanded by everyone who is interested in purchasing the product
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Marginal Utility
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The extra usefulness or satisfaction a person gets from aquiring or using one more unit of product
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Diminishing Marginal Utility
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States that the extra satisfaction we get from using additional quantities of the product begins to deminish
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Change in quantity demanded
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A movement along the demand curve that shows a change in the quantity of the product purchased in response to a change in price
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Income Effect
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The change in quantity demanded because of a change in price that alters consumers' real income
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Substitution Effect
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The change in quantity demanded because of the change in the relative price of the product
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Change in demand
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When something happens to cause the demand curve itself to shift
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Substitutes
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Products that can be used in place of other products
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Complements
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Products where the use of one increases the use of another
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Elasticity
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A measure of responsiveness that tells us how a dependent variable such as quantity responds to a change in an independent variable such as price
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Demand Elasticity
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The extent to which a change in price causes a change in the quantity demanded
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Elastic Demand
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When a given change in price causes a relatively larger change in quantity demanded
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Inelastic Demand
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A given change in the price causes a relatively smaller change in the quantity demanded
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Unit Elastic
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A given change in price causes a proportional change in quantity demanded
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Supply
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The amount of a product that would be offered for sale at all possible prices that could prevail in the market
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Law of Supply
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THe principle that suppliers will normally offer more for sale at high prices and less at lower prices
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Supply Schedule
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A listing of the various quantities of a particular product supplied at all possible prices in the market
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Supply Curve
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A graph showing the various quantities supplied at each and every price that might prevail in the market
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Quantity Supplied
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The amount that producers bring to market at any given price
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Change in Quantity Supplied
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The change in amount offered for sale in response to a change in price
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Change in Supply
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A situation where suppliers offer different amounts of products for sale at all possible prices in the market
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Subsidy
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A government payment to an individual, business, or other group to encourage or protect a certain type of economic activity
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Supply Elasticity
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A measure of the way in which quantity supplied responds to a change in price
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Theory of Production
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Deals with the relationship between the factors of production and the output of goods and services
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Short Run
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A period of production that allows producers to change only the amount of the variable input called labor
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Long Run
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A period of production long enough for producers to adjust the quantities of all their resources, including capital
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Law of Variable Proportions
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States that, in the short run, output will change as one input is varied while the others are held constant
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Production Function
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A concept that describes the relationship between changes in output to different amounts of a single input while other inputs are held constant
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Raw Materials
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Unprocessed natural products used in production
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Total Product
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The total output produced by the firm
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Marginal Product
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The extra output or change in total product caused by the addition of one or more unit of variable input
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Stages of Production
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Increasing returns, diminishing returns, and negative returns
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Diminishing Returns
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The stage where output increases at a diminishing rate as more units of variable input are added
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Fixed Cost
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The cost that a business incurs even if the plant is idle and ouput is zero
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Overhead
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Total fixed cost
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Variable Cost
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A cost that changes when the business rate of operation or output changes
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Total Cost
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The sum of the fixed and variable costs
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Marginal Cost
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The extra cost incurred when a business produces one additional unit of product
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E-Commerce
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Electronic business or exchange conducted over the Internet
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Total Revenue
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The number of units sold multiplied by the average price per unit
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Marginal Revenue
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The extra revenue associated with the production and sale of one additional unit of output
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Marginal Analysis
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A type of cost-benefit decision making that compares the extra benefits to the extra costs of an action
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Break-Even Point
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The total output or total product the business needs to sell in order to cover its total costs
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Profit-Maximizing Quantity of Output
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This is reached when marginal cost and marginal revenue are equal
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