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101 Cards in this Set

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