Economics Semester One

Scarcity

The fundamental economic problem of having seemingly unlimited human wants in a world with limited resources.

Economics

The study of how people, businesses, and governments allocate scarce resources to satisfy their needs and wants.

Need

A basic requirement for survival, such as food, water, and shelter.

Want

A way of expressing a need or something desired but not essential for survival.

Factors of Production

Resources used to produce goods and services, including land, labor, capital, and entrepreneurship.

Land

Natural resources used in production, such as minerals, forests, water, and land itself.

Capital

Tools, equipment, machinery, and factories used in the production of goods and services.

Financial Capital

Money used to buy tools, equipment, and other resources for production.

Entrepreneurs

Individuals who take risks to start businesses, innovate, and bring together factors of production.

Production

The process of creating goods and services by combining resources.

GDP (Gross Domestic Product)

The total monetary value of all final goods and services produced within a country in a specific period.

Economic Products

Goods and services that are useful, relatively scarce, and transferable to others.

Good

A tangible product that satisfies wants or needs.

Consumer Good

A good intended for final use by individuals.

Capital Good

A good used to produce other goods and services, such as machinery or tools.

Service

An intangible act or activity that satisfies a need or want, such as healthcare or education.

Value

The monetary worth of a good or service, determined by the market.

Paradox of Value

The contradiction that some necessities, like water, have little monetary value, while non-essentials, like diamonds, are highly valued.

Utility

The satisfaction or benefit derived from consuming a good or service.

Wealth

The accumulation of valuable economic resources, such as goods and services, that are scarce and transferable.

Market

A system or place where buyers and sellers interact to exchange goods and services.

Factor Markets

Markets where productive resources (factors of production) are bought and sold.

Product Markets

Markets where finished goods and services are bought and sold.

Economic Growth

An increase in a country's production of goods and services over time.

Productivity

A measure of the efficiency of production, often expressed as output per unit of input.

Division of Labor

The assignment of specific tasks to different people to improve efficiency.

Specialization

Focusing on a narrow area of expertise or production to increase efficiency and output.

Human Capital

The skills, knowledge, and experience possessed by individuals that enhance their productivity.

Economic Interdependence

The reliance of individuals, businesses, and nations on others to produce goods and services.

Trade-Offs

The alternatives that must be given up when one option is chosen over another.

Opportunity Cost

The value of the next best alternative foregone when making a decision.

Production Possibilities Frontier (PPF)

A curve showing the maximum possible combinations of two goods that can be produced with available resources and technology.

Cost-Benefit Analysis

A process of comparing the costs and benefits of a decision or action.

Free Enterprise Economy

An economic system where private businesses operate in competition, largely free of government control.

Standard of Living

The degree of wealth, comfort, material goods, and necessities available to a person or community.

Economic System

The method used by a society to produce, distribute, and consume goods and services.

Traditional Economy

An economic system in which customs, traditions, and beliefs determine the production and distribution of goods and services.

Command Economy

An economic system in which a central authority makes all decisions regarding production and distribution.

Market Economy

An economic system where supply, demand, and price determine the allocation of resources, with little government intervention.

Social Security

A government program that provides financial assistance to people with inadequate or no income, such as retirees and the disabled.

Inflation

The general increase in prices and decrease in the purchasing power of money over time.

Fixed Income

Income that does not increase, even when prices rise, often affecting retirees or others on set payments.

Capitalism

An economic system where private individuals or businesses own capital goods and operate for profit.

Free Enterprise

An economic system where private businesses operate in a competitive environment with minimal government intervention.

Voluntary Exchange

A transaction where buyers and sellers freely and willingly engage in trade, both believing they benefit.

Private Property Rights

The legal right to own and control resources, property, and assets.

Profit

The financial gain made when revenue exceeds the costs of production.

Profit Motive

The incentive to improve material well-being by seeking financial gain.

Competition

The rivalry among sellers to attract customers and achieve higher profits.

Consumer Sovereignty

The concept that consumers have the power to decide what goods and services are produced based on their purchasing decisions.

Mixed Economy/Modified Private Enterprise Economy

An economic system that blends private enterprise with significant government regulation and intervention.

Sole Proprietorship

A business owned and operated by one person.

Unlimited Liability

A situation in which the owner of a business is personally responsible for all of its debts.

Inventory

The stock of goods or materials a business holds for resale or production.

Limited Life

The condition where a business legally ends when the owner dies, quits, or sells the business.

Partnership

A business owned by two or more people who share profits, losses, and management responsibilities.

Limited Partnership

A partnership where at least one partner has limited liability and is not actively involved in management.

Bankruptcy

A legal process allowing individuals or businesses unable to repay debts to seek relief and restructure their obligations.

Corporation

A business recognized as a separate legal entity with the ability to own property, sue, and be sued.

Charter

A legal document issued by the government giving a corporation the authority to operate.

Stock

A share of ownership in a corporation.

Stockholders

Individuals or entities that own shares of stock in a corporation.

Dividend

A portion of a corporation’s profits paid to stockholders.

Common Stock

Shares that provide voting rights and a share of profits, but with no guaranteed dividend.

Preferred Stock

Shares that offer fixed dividends and priority over common stock in asset distribution but lack voting rights.

Bond

A fixed-income investment representing a loan made by an investor to a borrower (typically a corporation or government).

Principal

The original amount of money borrowed or invested.

Interest

The cost of borrowing money or the return earned on investment.

Double Taxation

A situation where corporate profits are taxed, and dividends paid to shareholders are also taxed as personal income.

Merger

The combination of two or more companies into a single entity.

Income Statement

A financial document showing a business’s revenue, expenses, and profits over a specific period.

Net Income

The total profit of a business after all expenses, taxes, and costs are deducted from revenue.

Depreciation

The gradual reduction in the value of a tangible asset over time due to wear and tear or obsolescence.

Cash Flow

The total amount of money being transferred in and out of a business, especially as it relates to liquidity.

Horizontal Merger

The combination of two or more firms producing the same type of product.

Vertical Merger

The combination of firms involved in different stages of production for the same product.

Conglomerate

A corporation composed of multiple businesses operating in unrelated industries.

Multinational

A company that operates in multiple countries.

Nonprofit Organization

An organization that operates to serve a public purpose rather than to generate profit.

Cooperative

A business owned and operated by a group of individuals for their mutual benefit.

Labor Union

An organization of workers formed to protect and advance their rights and interests.

Collective Bargaining

The process by which labor unions and employers negotiate wages, working conditions, and benefits.

Professional Association

A group of individuals in a specialized profession that works to promote the interests of its members.

Chamber of Commerce

A local association of businesses that promotes and protects the interests of the business community.

Better Business Bureau (BBB)

A nonprofit organization focused on advancing marketplace trust by providing ratings and reviews for businesses.

Public Utilities

Companies that provide essential services such as water, electricity, and natural gas, often subject to government regulation.

Microeconomics

The branch of economics that focuses on the behavior of individuals and businesses, and how they make decisions regarding the allocation of resources.

Demand

The quantity of a good or service that consumers are willing and able to purchase at various prices during a specific period.

Demand Schedule

A table that shows the quantities of a good or service that consumers will buy at different prices.

Demand Curve

A graphical representation of the demand schedule, showing the relationship between price and quantity demanded.

Law of Demand

The economic principle stating that as the price of a good or service decreases, the quantity demanded increases, and vice versa, all else being equal.

Market Demand Curve

A demand curve that represents the total quantity demanded by all consumers in a market at different prices.

Marginal Utility

The additional satisfaction or benefit a consumer gains from consuming one more unit of a good or service.

Diminishing Marginal Utility

The principle that as a person consumes more of a good or service, the additional satisfaction gained from each additional unit decreases.

Change in Quantity Demanded

A movement along the demand curve caused by a change in the price of the good or service.

Change in Demand

A shift of the entire demand curve, caused by factors such as changes in income, preferences, or prices of related goods, rather than a change in the price of the good itself.

Substitute

A good or service that can replace another, such that an increase in the price of one leads to an increase in demand for the other.

Complement

A good or service that is used in conjunction with another, such that an increase in the price of one leads to a decrease in demand for the other.

Elasticity

A measure of how responsive one variable is to a change in another, such as how demand or supply reacts to changes in price.

Demand Elasticity

The responsiveness of the quantity demanded of a good or service to a change in its price.