Economics Midterm

good

Tangible economic product that is useful, relatively scarce, transferable to others; used to satisfy wants and needs

consumer good

Good intended for final use by consumers rather than businesses

free enterprise

Economy in which competition is allowed to flourish with a minimum of government interference

capitalism

Economic system in which private citizens own and use the factors or production in order to generate profits

economic system

Organized way a society provides for the wants and needs of its people

fixed income

Income that does not increase even though prices go up

consumer sovereignty

Role of consumer as ruler of the market when determining the types of goods and services produced

social security

Federal program of disability and retirement benefits that covers most working people

private property rights

Fundamental feature of capitalism, which allows individuals to own and control their possessions as they wish

chamber of commerce

Nonprofit organization of local businesses whose purpose is to promote their interests

income statement

Report showing a business's sales, expenses, and profits for a certain period

principal

Amount borrowed when getting a loan or issuing a bond

deprecation

Gradual wear on capital goods during production

Better Business Bureau

Business-sponsored nonprofit organization providing information on local companies to consumers

stockholder

Person who owns shares in a corporation

demand

Combination of desire, ability, and willingness to buy a product

microeconomics

Branch of economic theory that deals with behavior and decision-making by small units such as individuals and firms

Law of Demand

Rule stating that more will be demanded at lower prices and less at higher prices

inome effect

The portion of a change in quantity demanded caused by a change in the consumer's real income when the price of the product changes

elastic

Type of elasticity where the percentage change in the independent variable (usually price) causes more than proportionate change in the dependent variable(usually quantity demanded or supplied)

inelastic

Type of elasticity where the percentage change in the independent variable (usually price) causes a less than proportionate change in the dependant variable (usually quantity demanded or supplied)

unit elastic

Elasticity where a change in the independent variable (usually price) generates a proportional change of the dependent variable (quantity demanded or supplied)

elasticity

A measure of responsiveness that tells us how a dependant variable such as quantity responds to a change in independent variable such as price

price

monetary value of a product as established by supply and demand

rebate

partial refund of the original price of a product

collusion

Agreements, usually illegal, among producers to fix prices, limit output, or divide markets

entrepreneur

Risk-taking individual in search of profit

value

Worth of a good or service as determined by the market

paradox of value

Apparent contradiction between the high value of nonessentials and low value of essentials

human capital

Sum of people's skills, abilities, health, and motivation

trade-offs

Alternatives that must be given up when one is chosen rather than another

excess supply

when quantity supplied is more than quantity demanded

excess demand

when quantity demanded is more than quantity supplied

stock

A share of ownership in a corporation

marginal utility

Satisfaction or usefulness obtained from acquiring one or more unit of a product

diminishing marginal utility

Decreasing satisfaction or usefulness, as additional units of a product are required

competition

The struggle among sellers to attract consumers while lowering costs

product market

Market where goods and services are offered for sale