Economics Terms Unit 1

Economies, markets, scarcity, factors of production

Artificial Scarcity

when the quantity of a resource is controlled so that it has the appearance of scarcity

Scarcity

gives a product its value, how much do we need it; only a problem if there is a demand for a resource

Value

what you get

Price

what you pay for

Utility

usefulness of a product (solves a problem for the consumer, thats why they buy it)

Opportunity Cost

opportunity lost when you select one thing over another

Allocative Efficiency

producting the RIGHT THING

Productive Efficiency

operating at MAX capacity

Factors of Prouction

Land (unprocessed resources), Labor (must be human, paying workers), Financial capital (money needed to produce a product

Goods

tangible, either consumer good or capital good

Consumer good

Final use, not producing anything else (someone buys a hammer to renovate their house)

Capital good

something else can be created with that good (someone buys a hammer to build something to sell)

Product

either a good or a service

Service

intangible, consumer service (something like babysitting) or capital service (brings revenue)

Production Possibilities Curve

meaures the possibilities of how much two resources can be produced

Productive efficiency

producing at the maximum capacity with the current factors of production

Conspicuous Consumption

the purchase of goods and services specifically to show ones wealth

Need

something that is required for survival or under specific circumstances (that’s a relative need like suit for a job interview)

Want

an expression of a need (if you want pizza, you probably need sodium)

Factor Market

resourse market, where the factors of production are purchased (wholesale)

Product Market

comsumer goods and services are purchased (retail)

Command Economy

resources are produced and distributed by the dictates of the state (central planning authority), determines the needs and wants of the population and sets production goals to reach them

Traditional Economy

the traditions of the community will dictate how recourses are produced and distributed, the traditions are rules and regulated (occupations are hereditary)

Market Economy

individuals determine how resources will be produced and distributed in a way that best meets consumer demand, Laissez-faire - the government is not involved

Mixed Economy

a blend of the market and command economies, provide a healthy balance of economic security and freedom

Economic Freedom

people are entitled to make their own economic decisions, personal responsibility

Economic Security

basic needs are taken care of by the state, but you must accept more control

Economic Efficiency

using all the resources wisely to maximize utility and longevity

Economic Stability (price stability)

Maintaining a healthy level of inflation, 2-4% is good

Economic Growth

having access to more and better quality goods and services, however with it comes inflation because there is an increase in consumption (demand pull inflation)

Capitalism

an economic and political system where a countrys economy is run by private companies/owners, more economic freedom and less security, more of a conservative philosophy

Communism

socialism, marxism, liberal philosophy, more economic security and less freedom, where all property is publicly owned and each person works and is paid according to their abilities and needs

Monopoly

one company that controls 90% or more of an industry, horizontal consolidation or horizontal integration

Horizontal Merger

when the supply is NOT controlled, when companies of the same industry merge

Vertical Merger

when the supply IS controlled, when companies involved at different stages of the supply chain merge (for a common good or service)