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241 Cards in this Set

  • Front
  • Back
The study of how individuals and societies make choices about ways to use scarce resources to fulfill their wants.
Condition of not being able to have all of the goods and services on wants, because wants exceed what can be made from all available resources at any given time.
Factors of Production
Resources of land, labor, capital, and entrepreneurship used to produce goods and services.
Natural resources and surface land and water.
Human effort directed toward producing goods and services.
tangible objects that can satisfy people's wants and needs.
Action done for others for a fee.
Previously manufactured goods used to make other goods and services.
The amount of output (goods and services) that results from a given level of inputs(land, labor, capital, entrepreneurship).
Ability of risk-taking individuals to develop new products and start new businesses in order to make profits.
Advance in knowledge leading to new and improved goods and services and better ways of producing them.
Sacraficing one good or service to purchase or produce another.
Opportunity Cost
Value of the next best alternative given up for the alternative that was chosen.
Production Possibilities Curve
Graph showing the maximum combinations of goods and services that can be produced from a fixed amount of resources in a given period of time.
The branch of economic theory that deals with behavior and decision making by small units such as individuals and firms.
The branch of economic theory dealing with the economy as a whole and decision making by large units such as governments.
The production and distribution of goods and services in a society.
Economic Model
A theory or simplified representation that helps explain and predict economic behavior in the real world.
Educated guess or prediction.
Economic System
Way in which a nation uses its resources to satisfy people's needs and wants.
Traditional Economy
System in which economic decisions are based on customs and beliefs that have been handed down from generation to generation.
Command Economy
System in which the government controls the factors of production and makes all decisions about their use.
Market Economy
System in which individuals own the factors of production and make economic decisions through free interaction while looking out for their own and their families' best interests.
Freely chosen activity between buyers and sellers of goods and services.
Circular Flow of Economic Activity
Economic model that pictures income as flowing continously between businesses and consumers.
Mixed Economy
System combining characteristics of more than one type of economy.
Economic system in which private individuals own the factors of production. (another name for a market economy)
Economic system in which the government minimizes its interference with the economy. It lets people "do as they choose".
Free Enterprise System
Economic system in which individuals own the factors of production and decide how to use them with legal limits. Same as capialism.
The money left after all the costs of production- wages, rents, interest, and taxes- have been paid.
Profit Incentive
Desire to make money that motivates peple to produce and sell goods and services.
Private Property
Whatever is owned by individuals rather than by the government.
The rivalry among producers or sellers of similar goods and services to win more business.
Economic Efficiency
Wise use of available resources so that costs do not exceed benefits.
Economic Equity
The attempt to balance an economic policy so that everyone benefits fairly.
Standard of Living
The material well-being of an individual, group, or nation measured by how well their necessities and luxeries are satisfied.
Economic Growth
Expansion of the economy to produce more goods, jobs, and wealth.
Term used by Karl Marx referring to workers.
Term used by Karl Marx for his ideal society in which no government is necessary.
Democractic socialism
System that works within the constitutional framework of a nation to elect socialists to office. The government usually controls only some areas of the economy.
Authoritarian Socialism
System that supports revolution as a means to overthrow capitalism and bring about socialist goals. The entire economy is controlled by a central government (also called communism today)
Five-Year Plans
Centralized planning system that was the basis for China's economic system; eventually was transformed to a regional planning system leading to limited free enterprise.
World Trade Organization (WTO)
World's largest trade agreement- currently includes 144 nations.
The change from state ownership of business, land, and buildings to private ownership.
Welfare State
Country that has a blend of capitalism and socialism, combining private ownership of the means of production with the goal of social equality for its citizens.
Any person or group that buys or uses goods and services to satisfy personal needs and wants.
Disposable Income
Income remaining for a person to spend or save after all taxes have been paid.
Discretionary Income
Money income a person has left to spend on extras after necessities have been bought.
Rational Choice
Choosing the alternative that has the greatest value from among comparable-quality products.
Competitive Advertising
Advertising that attempts to persuade consumers that a product is different from and superior to any other.
Informative Advertising
Advertising that benefits consumers by giving information about a product.
Bait and Switch
Ad that attracts consumers with a low-priced product, then tries to sell them a higher-priced product.
Comparison Shopping
Getting information on the types and prices of products available from different stores and companies.
Promise made by a manufacturer or a seller to repair or replace a product within a certain time period if it is found to be faulty.
Brand Name
Word, picture, or logo on a product that helps consumers distinguish it from similar products.
Generic Brand
General name for a product rather than a specific brand name given by the manufacturer.
Movement to educate buyers about the purchases they make and to demand better and safer products from manufacturers.
Ethical Behavior
Acting in accordance with moral and ethical convictions about right and wrong.
Receipt of money either directly or indirectly to buy goods and services in the present with the promise to pay for them in the future.
Amount of money originally borrowed in a loan.
Amount of money the borrower must pay for the use of someone else's money.
Installment Debt
Type of loan repaid with equal payments over a specific period of time.
Durable Goods
Manufactured items that have a life span longer than three years.
Installment debt owed on houses, buildings, or land.
Commercial Bank
Bank whose main functions are to accept deposits, lend money, and transfer funds among banks, individuals, and businesses.
Savings and Loan Association (S& L)
Depository institution that accepts deposits and lends money.
Savings Bank
Depository institution originally set up to serve small savers overlooked by commercial banks.
Credit Union
Depository institution owned and operated by its members to provide saings accounts and low-interest loans only to its members.
Finance Company
Company that takes over contracts for installment debts from stores and adds a fee for collecting the debt
Consumer Finance Company
Company that makes loans directly to consumers at high rates of interest.
Charge Account
Credit extended to a consumer allowing the consumer to buy goods or services from a particular company and to pay for them later.
Credit Limit
The maximum amount of goods and services a person can buy on the promise to pay in the future.
Credit Card
Credit device that allows a person to make purchases at many places without paying cash.
Finance Charge
The cost of credit expressed monthly in dollars and cents.
Annual Percentage Rate (APR)
Cost of credit expressed as a yearly percentage.
Credit Bureau
Private business that investigates a person to determine the risk involved in lending money to that person.
Credit Check
Investigation of a person's income, current debts, personal life, and past history of borrowing and repaying debts.
Credit Rating
Rating of the risk involved in lending money to a specific person or business.
Something of value that a borrower lets the lender claim if a loan is not repaid.
Secured Loan
Loan that is backed up by collateral.
Unsecured Loan
Loan guaranteed only by a promise to repay it.
Usury Law
Law restricting the amount of interest that can be charged for credit.
The inability to pay debts based on the income received.
Club Warehouse Store
Store that carries a limited number of brands and items in large quantities and is less expensive than supermarkets.
Convenience Store
Store open 16 to 24 hours a day, carrying a limited selection of relatively higher priced items.
Private-Labeled Products
Lower-priced store-brand products carried by some supermarket chains and club warehouse chains.
Ability of an item to last a long time.
Service Flow
The amount of use a person gets from an item over time and the value a person places on this use.
Closing Costs
Fees involved in arranging for a mortgage or in transferring ownership of property.
Fees paid to a lender and computed as a percentage of a loan.
Long-term agreement describing the terms under which property is rented.
Security Deposit
Money a renter lets an owner hold in case the rent is not paid or an apartment is damaged.
Registration Fee
Licensing fee, usually annual, paid to a state for the right to use a car.
Liability Insurance
Insurance that pays for bodily injury and property damage.
Setting aside income for a period of time so it can be used later.
Payment people receive when they lend money or allow someone else to use their money.
Passbook Savings Account
Account for which a depositor receives a booklet in which deposits, withdrawls, and interest are recorded.
Statement Savings Account
Account similar to a passbook savings account except that the depositor receives a monthly statement showing all transactions.
Money Market Deposit Account (MMDA)
Account that pays relatively high interest, requires a minimum balance, and allows immediate access to money.
Time deposits
Savings plans that require savers to leave their money on deposit for certain periods of time.
Period of time at the end of which time deposits will pay a stated rate of interest.
Certificates of Deposit (CDs)
Time deposits that state the amount of the deposit, maturity, and rate of interest being paid.
People who have invested in a corporation and own some of its stock.
The money return a stockholder receives on the amount he or she originally invested in the company.
Capital Gain
Increase in value of an asset from the time it was bought to the time it was sold.
Capital Loss
Decrease in value of an asset or bond from the time it was bought to the time it was sold.
Certificate issued by a company or the government in exchange for borrowed money.
Tax-Exempt Bonds
Bonds sold by local and state governments; interest paid on the bond is not taxed by the federal government.
Savings Bonds
Bonds issued by the federal government as a way of borrowing money; they are puchased at half the face value and increase every 6 months until the full face value is reached.
Treasury Bills
Certificates issued by the U.S. Treasury in exchange for a minimum amount of $1,000 and maturing in 3 months to 1 year.
Treasury Notes
Certificates issued by the U.S. Treasury in exchange for minimum amounts of $1,000 and maturing in 1 to 10 years.
Treasury Bonds
Certificates issued by the U.S. Treasury in exchange for a minimum amount of $1,000 and maturing in 10 or more years.
Person who acts as a go-between for buyers and sellers of stocks and bonds.
Over-the-Counter Market
Electronic purchase and sale of stocks and bonds, often of smaller companies, which takes place outside the organized stock exchanges.
Mutual Fund
Investment company that pools the money of many individuals to buy stocks, bonds, or other investments.
Money Market Fund
Type of mutual fun that uses investors' money to make short-term loans to businesses and banks.
Pension Plans
Company plans that provided retirement income for their workers.
Keogh Plan
Retirement plan that allows self-employed individuals to save a maximum of 15% of their income up to a specified amount each year, and to deduct that amount from their yearly taxable income.
Individual Retirement Plan (IRA)
Private retirement plan that allows individuals or married couples to save a certain amount of untaxed earnings per year with the interest being tax-deferred.
Roth IRA
Private retirment plan that taxes income before it is saved, but which does not tax interest on that income when funds are used upon retirement.
Spreading of investments among several different types of accounts to lower overall risk.
The amount of a good or service that consumers are able and willing to buy at various possible prices during a specified time period.
The amount of a good or service that producers are willing and able to sell at various prices during a specified time period.
Voluntary Exchange
A transaction in which a buyer and a seller exercise their economic freedom by working out their own terms of exchange.
Law of Demand
Economic rule stating that the quantity demanded and price move in opposite direction: As price goes up, the quantity demanded goes down. As price goes down, quantity demanded goes up.
Quantity Demanded
The amount of a good or service that a consumer is willing and able to purchase at a specific price.
Real Income Effect
Economic rule stating that individuals cannot keep buying the same quantity of a product if its price rises while their income stays the same.
Substitution Effect
Economic rule stating that if two items satisfy the same need and the price of one rises, people will buy the other.
The ability of any good or service to satisfy consumer wants.
Marginal Utility
An additional amount of satisfaction.
Law of Diminishing Marginal Utility
Rule stating that the additional satisfaction a consumer gets from purchasing one more unit of a product will lessen with each additional purchase.
Demand Schedule
Table showing quantities demanded at different possible prices.
Demand Curve
Downward-sloping line that shows in graph form the quantities demanded at each possible price.
Complementary Good
A product often used with another product.
Economic concept dealing with consumers' responsiveness to an increase or decrease in price of a product.
Price Elasticity of Demand
Economic concept that deals with how much demand varies according to changes in price.
Elastic Demand
Situation in which the rise or fall in a product's price greatly affects the amount that people are willing to buy.
Inelastic Demand
Situation in which a product's price charge has little impact on the quantity demanded by consumers.
Law of Supply
Economic rule stating that price and quantity supplied move in the same direction: As the price rises for a good, the quantity supplied generally rises. As the price falls, quantity supplied also falls.
Quantity Supplied
The amount of a good or service that a producer is willing and able to supply at a specific price.
Supply Schedule
Table showing quantities supplied at different possible prices.
Supply Curve
Upward-sloping line that shows in graph form the quantities supplied at each possible price.
Law of Diminishing Returns
Economic Rule that says as more units of a factor of production ( such as labor) are added to other factors of production (such as equipment), after some point total output continues to increase but at a diminishing rate.
Equilibrium Price
The price at which the amount of producers are willing to supply is equal to the amount consumers are willing to buy.
Situation in which the quantity demanded is greater than the quantity supplied at the current price.
Situation in which quantity supplied is greater than quantity demanded at the current price.
Price Ceiling
A legal maximum price that may be charged for a particular good or service.
The distribution of goods and services based on something other than price.
Black Market
"Underground" or illegal market in which goods are traded at prices above their legal maximum prices or in which illegal goods are sold.
Price Floor
A legal minimum price below which a good or service may not be sold.
Person who organizes, manages, and assumes the risks of business in order to gain profits.
A beginning business enterprise
Small Business Incubator
Private or government-funded agency that assis new businesses by providing advice or low-rent buildings and supplies.
Extra supply of the items used in a business, such as raw materials or goods for sale.
Income received from the sale of goods and/or services; also slips of paper documenting a purchase.
Sole Proprietorship
Business owned and operated by one person.
Owner of a business
Unlimited Liability
Requirement that an owner is personally and fully responsible for all losses and debts of a business.
All items to which a businessor household holds legal claim.
Business that two or more individuals own and operate.
Limited Partnership
Special form of partnership in which one or more partners have limited liability but no voice in management.
Joint Venture
Partnership set up for a specific purpose just for a short period of time.
Type of business organization owned by many people but treated by law as though it were a person; it can own property, pay taxes, make contractsm and so on.
Share of ownership in a corporation that entitles the buyer to a certain part of the future profits and assets of the corporation.
Limited Liability
Requirement in which an owner's responsibility for a company's debts is limited to the size of the owner's investment in the firm.
Articles of Incorporation
Document listing basic information about a corporation that is filed with the state where the corporation will be headquartered.
Corporate Charter
License to operate granted to a corporation by the state where it is established.
Common Stock
Shares of ownership in a corporation that give stockholders voting rights and a portion of future profits (after holders of preferred stock are paid).
Market Structure
The extent to which competition prevails in particular markets.
Preferred Stock
Shars of ownership in a corproation that give stockholders a portion of future profits (before any profits go to holders of common stock) but no voting rights.
Contract in which one business (the franchiser)sells to another business (the franchisee) the right to use the franchiser's name and sell its products.
Perfect Competition
Market situatio in which there are numerous buyers and sellers, and no single buyer or seller can affect price.
Market Situation in which a single supplier makes up an entire industry for a good or service with no close substitutes.
Barriers to Entry
Obstacles to competition that prevent others from entering a market.
Economics of Scale
Low production costs resulting from the large size of output.
Exclusive right to make, use, or sell an invention for a specified number of years.
Exclusive right to sell, publish, or reproduce creative works for a specified number of years.
Industry dominated by a few suppliers who exercise some control over price.
Product Differentiation
Manufacturers' use of minor differences in quaility and features to try to differentiate between similar goods and services.
Arrangement among groups of industrial businesses to reduce international competition by controlling the price, production, and distribution of goods.
Monopolistic Competition
Market situation in which a large number of sellers offer similar but slightly different products and in which each has some control over price.
Interlocking Directorate
A board of directors, the majority of whose members also serve as the board of directors of a competing corporation.
Antitrust Legislation
Federal and state laws passed to prevent new monopolies from forming and to break up those that already exist.
A combined company that results when one corporation buys more than half the stock of another corporation and thus controls the second corporation.
Large corporation made up of smaller corporations dealing in unrelated business.
Reduction of government regulation and control over business activity.
Obtaining funds or money capital for business expansion.
Cost-Benefit Analysis
A financial process in which a business estimates the cost of any action and compares it with the benefits of that action.
Total income from sales of output.
The money earned after a business subtracts its costs from its revenues.
Debt Financing
Raising money for a business through borrowing.
Short-Term Financing
Money borrowed by a business for any period of time less than a year.
Intermediate-Term Financing
Money borrowed by a business for 1 to 10 years.
Long-Term Financing
Money borrowed by a business for a period of time of more than 10 years.
Process of changing resources into goods that satisfy the needs and wants of individuals and businesses.
Consumer Goods
Goods produced for individuals and sold directly to the public to be used as they are.
Combined labor of people and machines.
Assembly Line
Production system in which the good being produced moves on a convyor belt past workers who perform individual tasks in assembling it.
Division of Labor
Breaking down of a job into small tasks performed by different workers.
Production process in which machines do the work and people oversee them.
Sophisticated computer-controlled machinery that operates an assembly line.
All the activities needed to move goods and services from the producer to the consumer.
Consumer Sovereignty
The role of the consumer as ruler of the market when determining the types of goods and services produced.
Market Research
Gathering, recording, and analyzing data about the types of goods and services that people want.
Market Survey
Information gathered by researchers about possible users of a product based on such characteristics as age, gender, income, education, and location.
Offering a product for sale in a small area for a limited period of time to see how well it sells before offering it nationally.
Price Leadership
Practice of setting prices close to those charged by other companies selling similar products.
Penetration Pricing
Selling a new product at a low price to attract customers away from an established product.
Use of advertising to inform consumers that a new or improved product or service is available and to persuade them to purchase it.
Direct-Mail advertising
Type of promotion using a mailer that usually includes a letter describing the product or service and an order blank or application form.
Product Life Cycle
Series of stages that a product goes through from first introduction to complete withdrawl from the market.
Channels of Distribution
Routes by which godos are moved from producers to consumers.
Businesses that purchase large quantities of goods from producers for resale to other businesses.
Businesses that sell consumer goods driectly to the public.
Business transaction conducted over computer networks, in particular the World Wide Web.
Civilian Labor Force
Total number of people 16 years old or older who are either employed or actively seeking work.
Blue-Collar Workers
Category of workers employed in crafts, manufacturing, and nonfarm labor.
White-collar Workers
Category of workers employed in offices, sales, or professional positions.
Service Workers
People who provide services directly to individuals.
Unskilled Workers
People whose jobs require no specialized training.
Semiskilled Workers
People whose jobs require some training, often using modern technology.
Skilled Workers
People who have learned a trade or craft through a vocational school or as an apprentice to an experienced worker.
Highly educated individuals with college degrees and usually additional education or training.
Minimum Wage Law
Federal Law that sets the lowest legal hourly wage rate that may be paid to certain types of workers.
Labor Union
Association of workers organized to improve ages and working conditions for its members.
Deliberate work stoppage by workers to force an employer to give in to their demands.
Craft Union
Union made up of skilled workers in a specific trade or industry.
Industrial Union
Union made up of all the workers in an industry regardless of job or skill level.
Local Union
Members of a union in a particular factory, company, or geographic area.
Closed Shop
Company in which only union members could be hired.
Union Shop
Company that requires new employees to join a union after a specific period of time.
Agency Shop
Company in which employees are not required to join the union, but must pay union dues.
Right-to-Work Laws
State laws forbidding unions from forcing workers to join and pay union dues.
Collective Bargaining
Process by which unions and employees negotiate the conditions of employment.
Cost-of-Living Adjustment (COLA)
Provision calling for an additional wage increase each year if the general level of prices rises.
A neutral person tries to get both sides to reach an agreement during negotiations.
Union and managment submit the issues they cannot agree on to a third party for a final decision.
Action of strikers who walk in front of a workplace carrying signs that state their disagreement with the company.
Economic pressure exerted by unions urging the public not to purchase the goods or services produced by a company.
Situation that occurs when management prevents workers from returning to work until they agree to a new contract.
Court order preventing some activity.