Download economic terms

ECONOMIC TERMS
Scarcity – condition that arises because society does not have enough resources to produce all
the things people would like to have.
Profit motive – driving force that encourages people and organizations to improve their material
well-being.
Needs – basic requirements for survival.
Market – an arrangement that allows buyers and sellers to come together to exchange goods and
services.
Entrepreneurs – factor of production that involves risk-takers in search of profits.
Capital - factor of production that includes the tools, equipment, and factories used in the
production of goods and services.
Labor – factor of production that includes people and their efforts, abilities, and skills.]
Land – factor of production that includes all natural resources.
Capitalism – economic system in which private citizens own the factors of production.
Mixed economy – economic system in which free economic activity is subject to some
government intervention and regulation.
Consumer sovereignty – concept that the consumer is the ruler of the market.
Private property – concept that people have the right to control their possessions.
Economic system – an organized way of providing for wants and needs of a society.
Command economy – economic system in which basic economic systems are made by a central
authority.
Traditional economy – economic system in which basic economic activity stems from ritual,
habit, or custom.
Market economy – economic system in which basic economic decisions are made by people
and firms acting in their own best interests.
Wants – means of expressing needs.
Goods – tangible commodities.
Services – works that are performed for someone.
Opportunity cost – the cost of the next best alternative when a choice is made.
Production possibilities frontier – diagram representing carious combinations of goods and
services an economy can produce when all resources are fully employed.
Trade-off – an alternative choice.
Decision-making grid – a toll that can bee used to help make an economic decision by
identifying alternatives and criteria to evaluate the alternatives.
Guns and butter - the classic example used to illustrate opportunity costs alo9ng the production
possibilities frontier.
Microeconomics – part of economics that deals with behavior and decision making of small
units.
Demand curve – graph that shows the quantity demanded at all possible prices at a given time.
Demand – desire, ability, and willingness to buy a product,
Desire to won a product – common view of demand.
Demand schedule – listing that shows the quantity demanded at all possible prices at a given
time.
Supply schedule – listing of quantities that would bee offered for sale at all possible prices that
could prevail in a market.
Subsidy – a government payment to an individual, business, or other group to encourage or
protect a certain type of economic activity.
Supply elasticity – way in which quantity supplied changes in response to a change in price.
Quantity supplied – amount that producers bring to market at any one price.
The 3 basic economic questions? 1) what to produce 2) for whom to produce 3) how to produce
The study of economics includes 1) description 2) analysis 3) explanation
Fundamental problem of economics? Scarcity
What is best explanation of “there is no such thing as a free lunch”? There is always a cost
associated when something is produced.
Relationship between trade-offs and opportunity costs?
Opportunity costs are incurred when trade-offs are made.
What term refers to a value of a trade-off? Opportunity cost
The demand curve always slopes downward.
The supply curve is always sloping upward.
If the quantity supplied changes little to a price change, the supply is INELASTIC.
Compliments are items that are sold together. (flashlights/batteries Peanut butter/jelly)
What would cause a change in demand? Decrease in price or changing consumer tastes.
What would cause an increase in supply? Great demand or introduction of new technology.
Capital goods are anything used to conduct business (bulldozer, oven, cash register)