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Essential Economic Vocabulary
Economy – a system for producing, distributing and consuming goods and services
Producer – owners and workers
Goods – products or items that are sold.
Services – producers perform these for other people
Consumer – people who buy and use the goods and services
Production – the process of manufacturing or growing something
Distribution – the delivery of products to various places .
Consumption – the use of goods and services
Natural Resources – things that exist freely in the nature for human use.
Human Resources – set of people who make up the workforce of a an organization .
Capital Resources –assets for the production of goods and services ex. Machines
Capitalism – most basic and non-basic businesses are privately owned.
Socialism – the government owns most basic industries for good of society.
Law of Supply and Demand
Supply – refers to the quantity of resources available in the market for sale at a given
period of time.
Demand – is the quantity of a good that consumers are willing to purchase at various
prices during a given period of time.
The law of supply and demand refers to one of the core concepts in economics
explaining the relationship between demand, supply, and price of products and
services. It integrates the concepts of the law of demand and the law of supply.
The laws of supply and demand are basic concepts helping businesses analyze the
best-selling price, the ideal supply rate, and the readiness of a market for a new
The law of demand explains that when the price increases demand decreases.
The law of supply explains that when the price increases seller increases the supply to
obtain maximum profit.
Equilibrium prices showcase the price at which supply and demand are equal and
satisfying in the market.
The 4 Basic Laws of Supply and Demand
Demand increases, and supply remains the same: In a competitive market, this will
cause an increase in the price. The shortage of products increases the value of the
Demand decreases, and supply remains the same: In this situation, the price
reduces. If the demand continues to decline, there will be a surplus of the product in the
market, subsequently dampening the product’s value.
Supply increases and demand remains unchanged: The easy availability of a
product causes a decrease in its price, manifesting an oversupply scenario if the
demand remains intact for long.
Supply decreases and demand remains unchanged: When supply decreases, and
there is no increase or decrease in demand, the price will increase.