Chapter 2 Flashcards
Capitalism
The private ownership of resources by individuals rather than by the government.
Demand
The quantity of a good or service that consumers are willing to buy at a given price.
Economic decision making
The process of choosing which needs, and wants, among several, will be satisfied using resources on hand.
Economic resources
Means through which goods and services are produced
Economies of scale
The cost advantages obtained due to expansion.
Equilibrium price and quantity
Point at which the supply and demand curves meet
Fixed costs
Costs that must be paid regardless of how much of a good or service is produced
Marginal benefit
Measures the advantages of producing one additional unit of a good or service
Marginal cost
Measures the disadvantages of producing one additional unit of a good or service
Needs
Those things that a person must have in order to survive
Opportunity cost
Value of the next best alternative
Profit
Difference between the revenues earned by a business and the costs of operating the business
Scarcity
Occurs when peoples needs and wants are unlimited and the resources to produce the goods and services to meet those needs are limited
Supply
The quantity of a good or service a producer is willing to produce at different prices
Variable costs
Costs that go up and down depending on the quantity of the good or service produced
Wants
Those things that a person thinks he or she must have in order to be satisfied
Economics is about making choices and
Satisfying the needs and wants of consumers.
Needs are things you must have to
Survive
Wants are things you think you must have to be
Satisfied
Three kinds of economic resources are used by entrepreneurs to produce goods and services
Natural resources, Human Resources, and capital resources
Entrepreneurs play an important role in the U.S. economy. They supply
Goods and services, provide capital investment and job creation, and serve as agents for change
In a command economy the government determines
What, how, and for whom products and services are produced
In a market economy individuals decide
What, how, and for whom products and services are produced
A mixed economy combines elements of
The command and market economies.
Traditional economies are simple economies operated
According to tradition or custom
The U.S. economic system is based on the principles of
Private property, freedom of choice, profit, and competition
Economic choices are necessary because of our
Unlimited desires and the scarcity of resources available to satisfy them.
Every economic decision incurs an
Opportunity cost
The functions of business are
Production, marketing, management, and finance
The four major market structures are
Perfect competition, monopolistic competition, oligopoly, and monopoly.
Market structure is determined by the
Nature and degree of competition among businesses that operates in the same industry.
