Economics Fundamentals and Market Structures Vocabulary

Vocabulary terms and definitions across basic economic principles, market structures, business organizations, and labor markets.

Opportunity Cost

the most desirable alternative given up as the result of a decision

Cost-Benefit Analysis

analysis that compares the costs of an action with the benefits of that action

Marginal Benefit

the extra benefit of adding one unit

Production Possibilities Curve

a graph that shows alternative ways to use a country's productive resources

Underutilization

the use of fewer resources than an economy is capable of using

Scarcity

the principle that limited amounts of goods and services are available to meet unlimited wants

Goods

the physical objects that someone produces

Services

the actions or activities that one person performs for another

Physical Capital

the human-made objects used to create other goods and services

Human Capital

the knowledge and skills a worker gains through education and experience

Profit

the amount of money a business receives in excess of its expenses

Specialization

the concentration of the productive efforts of individuals and businesses on a limited number of activities

Competition

the struggle among sellers to attract consumers while lowering costs

Socialism

a range of economic and political systems based on the belief that wealth should be distributed evenly throughout a society

Patent

a government license that gives the inventor of a new product the exclusive right to produce and sell it

Externalities

an economic side effect of a good or service that generates benefits or costs to someone other than the person deciding how much to produce or consume

Complements

two goods that are bought and used together

Fixed Cost

a cost that does not change no matter how much of a good or service is produced

Variable Cost

a cost that rises or falls depending on the quantity produced

Subsidy

a government payment that supports a business or market

Equilibrium

the point at which the demand for a product or service is equal to the supply of that product or service

Demand

the desire to own something and the ability to pay for it

Regulation

government intervention in a market that affects the production of a good

Total Costs

the sum of fixed costs and variable costs

Substitutes

goods that are used in place of one another

Surplus

when quantity supplied is more than quantity demanded

Shortage

a situation in which consumers want more of a good or service than producers are willing to make available at a particular price

Rationing

a system of allocating scarce goods and services using criteria other than price

Law of Supply

producers offer more of a good or service as its price increases and less as its price falls

Price Floor

a minimum price for a good or service

Demographics

the statistical characteristics of populations and population segments especially when used to identify consumer markets

Demand Curve

a graphic representation of a demand schedule

Price Ceiling

a maximum price that can legally be charged for a good or service

Supply Shock

a sudden shortage of a good

Deregulation

the removal of government controls over a market or industry

Pure/Perfect Competition

a market structure in which a large number of firms all produce the same product and no single seller controls supply or prices

Monopoly

a market in which a single seller dominates

Price War

a series of competitive price cuts that lowers the market price below the cost of production

Anti-trust Laws

laws that encourage competition in the marketplace

Merger

when two or more companies join to form a single firm

Barrier to Entry

any factor that makes it difficult for a new firm to enter a market

Oligopoly

a market structure in which a few large firms dominate a market

Natural Monopoly

a market that runs most efficiently when one large firm provides all of the output

Imperfect Competition

a market structure that fails to meet the conditions of pure competition

Price Discrimination

the division of consumers into groups based on how much they will pay for a good

Government Monopoly

a monopoly created by the government

Collusion

an illegal agreement among firms to divide the market set prices or limit production

Trust

an illegal grouping of companies that discourages competition similar to a cartel

Cartel

a formal organization of producers that agree to coordinate prices and production

Liability

the legal obligation to pay debts

Dividend

the portion of corporate profits paid out to stockholders

Multinational Corporation

a large corporation that produces and sells its goods and services in more than one country

Labor Force

all nonmilitary people who are employed or unemployed

Equilibrium Wage

the wage rate or price of labor services that is set when the supply of workers meets the demand for workers in the labor market

Strike

an organized work stoppage intended to force an employer to address union demands

Collective Bargaining

negotiations between representatives of labor and management to determine wages benefits and working conditions

Outsourcing

the practice of contracting with another company to do a specific job that would otherwise be done by a company's own workers

Assets

anything of value that is owned

Royalties

the share of earnings given by a franchisee as payment to the franchiser

Professional Organization

a nonprofit organization that works to improve the image working conditions and skill levels of people in particular occupations

Horizontal Merger

the combination of two or more firms competing in the same market with the same good or service

Vertical Merger

the merger of two or more firms involved in different stages of producing the same good or service

Stock

a certificate of ownership in a corporation

Mediation

a settlement technique in which a neutral person the mediator meets with each side to try to find a solution that both sides will accept

Arbitration

the process of bringing a labor dispute before a third party whose decision is legally binding on both sides

Sole Proprietorship

a business owned and managed by a single individual

Partnership

business organization owned by two or more persons who agree on a specific division of responsibilities and profits

Business Franchise

a contract that gives a single firm the right to sell its good within an exclusive market

Corporation

a legal entity owned by individual stockholders

Conglomerate

a corporation made up of three or more businesses in different industries

Cooperative

a voluntary association formed to carry on some kind of economic activity that will benefit its members

Non-profit Organization

an institution that functions much like a business but does not operate for the purpose of making a profit

Contingent Employment

employment that is temporary or part-time and does not provide the same benefits as full-time employment