Economic part1 Flashcards
An item that we desire but that is not essential to survival
Want
Something like air, food, or shelter that is necessary for survival
Need
The study of how people seek to satisfy their needs and wants by making choices
Economics
Physical objects such as clothes or shoes
Goods
Actions or activities one person performs for another
Services
Limited quantities of resources to meet unlimited wants
Scarcity
A situation in which a good or service is unavailable, or a situation in which the quantity demanded is greater than the quantity supplied, also know as excess demand
Shortage
Land, labor, and capital; the three groups of resources that’s are used to make all goods and services
Factors of Production
The effort that people devote to a task for which they are paid
Labor
Any human made resource that is used to create other goods or services
Capital
Ambitious leader who combines land, labor, and capital to create and market new goods and services
Entrepreneur
Using fewer resources than an economy is capable of using
Underutilization
As we shift factors of production from making one good or service to another, the cost producing the second item increases
Law of increasing costs
The income people receive for supplying factors of production: land, labor, or capital
Factor payments
Government programs that protect people experiencing unfavorable economic conditions
Safety Net
Level of economic prosperity
Standard of living
Economic system that relies on habit, custom, or ritual to decide questions of production and consumption of goods and services
Traditional Economy
Economic system in which decisions on production and consumption of goods and services are based on voluntary exchange in markets
Market economy
Economic system in which the central government makes all decisions on the production and consumption of goods and services
Centrally Planned Government
An arrangement that allows buyers and sellers to exchange things
Market
The concentration of the productive efforts of individuals and firms on a limited number of activities
Specialization
A person or group of people living in the same residence
Household
An organization that uses resources to produce a product, which it then sells
Firm
The financial gain made in a transaction
Profit
One’s own personal gain
Self-Intrest
An expectation that encourages people to behave in a certain way
Incentive
The power of the consumers to decide what gets produced
Consumer sovereignty
A social and political philosophy based on the belief that democratic means should be used to evenly distribute wealth throughout a society
Socialism
A political system characterized by a centrally planned economy with all economic and political power resting in the hands of the central government
Communism
Large farm leased from that state to groups of peasant farmers
Collective
An economic system characterized by private or corporate ownership of capital goods; investments that are determined by private decisions rather than by state control; and determined in a free market
Free enterprise
To sell to individuals state-run firms, which are then allowed to compete with one another in the marketplace
Privatize
The force that encourages people and organizations to improve their material well being
Profit motive
The concept that people may decide what agreements they want to enter into
Free contract
The struggle among producers for the dollars of consumers; the rivalry among sellers to attract customers while lowering costs
Competition
Laws requiring companies to provide full information about their products
Public Disclosure Laws
The total value of all final goods and services produced in a particular economy; the dollar value of all final goods and services produced within a country’s borders in a given year
Gross Domestic Product (GDP)
A period of macroeconomic expansion followed by a period of contraction
Business Cycle
A commitment to the value of work and purposeful activity; system of values that gives central importance to work
Work ethic
The process used to produce a good or service
Technology
A shared good or service for which it would be impractical to make consumers pay individually and to exclude nonpayers
Public good
The part of the economy that involves the transactions of individuals and businesses
Private sector
Someone who would not choose to pay for a certain good or service, but who would get the benefits of it anyway if it were provided as a public good
Free rider
A situation in which the market does not distribute resources efficiently
Market Failure
An income level below which income is insufficient to support families or households
Poverty Threshold
Government aid to the poor
Welfare
Goods and services provided for free or at greatly reduced prices
In-kind benefits
The desire to own som thing and the ability to pay for it
Demand
When consumers react to an increase in a good’s price by consuming less of that good and more of other goods
Substitution effect
A graphic representation of a demand schedule
Demand curve
A measure of how consumers react to a change in price
Elasticity of demand
Describes demand that is not very sensitive to a change in price
Inelastic
The total amount of money a firm receives by selling goods or services
Total revenue
The point at which quantity demanded and quantity supplied are equal
Equilibrium
Describes any price or quantity not at equilibrium; when quantity supplied is not equal to quantity demanded in a market
Disequilibrium
When quantity demanded is more than quantity supplied
Excess Demand
When quantity supplied is more than quantity demanded
Excess supply
A maximum price that can be legally charged for a good or service
Price ceiling
A price ceiling placed on rent
Rent Control
A minimum price that an employer can pay a worker for an hour of labor
Minimum Wage
Situation in which quantity supplied is greater than quantity demanded; also known as excess supply
Surplus
The financial and opportunity costs consumers pay when searching for a good or service
Search costs
A sudden shortage of a good
Supply shock
A system of allocating scarce goods and services using criteria other than price
Rationing
A market in which goods are sold illegally
Black Market
A market structure in which a large number of firms all produce the same product
Perfect competition
A product that is the same no matter who produces it, such as petroleum , notebook paper, or milk
Commodity
Any factor that makes it difficult for a new firm to enter a market
Barrier to entry
A market structure that does not meet the conditions of perfect competition
Imperfect competition
The expenses a firm must pay before it can begin to produce and sell goods
Start-up costs
A market dominated by a single seller
Monopoly
A license that gives the inventor of a new product the exclusive right to sell it for a certain period of time
Patent
The right to sell a good or service within an exclusive market
Franchise
A government issued right to operate a business
License
A division of customers into groups based on how much they will pay for a good
Price discrimination
The ability of a company to change prices and output lie a monopolist
Market Power
A series of competitive price cuts that lowers the market price below the cost of production
Price war
An agreement among firms to divide the market, set prices, or limit production
Collusion
An agreement among firms to charge one price for the same good
Price fixing
A formal organization or producers that agree to coordinate prices and production
Cartel
Selling a product below cost to drive competitors out of the market
Predatory Pricing
Like a cartel, an illegal grouping of companies that discourages competition
Trust
a combination of two or more companies into a single firm
Merger
The removal of some government controls over a market
Deregulation
An establishment formed to carry on commercial enterprise
Business organization
A business owned and managed by a single individual
Sole proprietorship
Authorization to start a business issued by the local government
Business license
Law in a city or town that designates separate areas for residency and for business
Zoning law
The legally bound obligation to pay debts
Liability
Payment other than wages or salaries
Fringe benefit
A business organization owned by two or more persons who agree on specific divisions of responsibilities and profits
Partnership
Partnership in which parteners share equally in both responsibility and liability
General partnership
Partnership in which only one partner is required to be a general partner
Limited partner
Partnership in which all partners are limited partners
Limited liability partnership (LLP)
Money and other valuables belonging to an individual or business
Assets
A legal entity owned by individual stockholders
Corporation
A certificate of ownership in a corporation
Stock
A formal contract to repay borrowed money with interest at fixed intervals
Bond
License to form a corporation issued by state government
Certificate of incorporation
The portion of corporate profits paid out to stockholders
Dividend
The combination of toe or more firms competing in the same market with the same good or service
Horizontal Merger
The combination of toe or more firms involved in different stages of producing the same good or service
Vertical merger
Business combination merging more than three businesses that make unrelated products
Conglomerate
Large corporation that produces and sells its goods and services throughout the world
Multinational corporation (MNC)
Share of earnings given as payment
Royalty
A business organization owned and operated by a group of individuals for their mutual benefit
Cooperative
Institution that functions much like a business, but does not operate for the purpose of generating profits
Nonprofit Organization
Nonprofit organization that promotes the interests of a particular industry
Trade association
