Economics Vocabulary Flashcards

Vocabulary flashcards covering key terms and definitions from the lecture notes.

Economics

The study of how people, businesses, and governments make choices to allocate scarce resources.

Economy

A system for coordinating society’s productive and consumptive activities.

Scarcity

The basic economic problem: limited resources but unlimited wants.

Resource

Anything used to produce goods and services (land, labor, capital, entrepreneurship).

Trade-off

Giving up one thing to get something else.

Opportunity cost

The value of the next-best alternative that is given up when a choice is made.

Incentive

Something that motivates people to act in a certain way.

Land

Natural resources used to produce goods and services.

Labor

Human effort, skills, and time used in production.

Capital (goods)

Human-made resources (tools, machines, factories) used to produce other goods and services.

Entrepreneur

A person who organizes resources and takes risks to create new products or businesses.

Labor force

All people 16+ who are working or actively seeking work.

Model

A simplified representation of reality used to explain and predict economic behavior.

Ceteris paribus

Latin for 'other things equal'; assumption that all other factors remain unchanged.

Marginal analysis

Comparing the additional benefits and additional costs of a decision.

Efficient

When resources are used in the best way possible, without waste.

Positive economics

Objective, fact-based statements about what is.

Normative economics

Value judgments or opinions about what should be done.

Command economy

An economy where the government makes all production and pricing decisions.

Market economy

An economy where decisions are made by buyers and sellers through voluntary exchange.

Comparative advantage

The ability to produce a good at a lower opportunity cost than another producer.

Absolute advantage

The ability to produce more of a good or service with the same resources as another producer.

Specialization

Concentrating on producing a limited range of goods/services to increase efficiency.

Terms of trade

The agreed-upon rate at which one good is exchanged for another between countries.

Production possibilities curve (PPC)

A graph showing the maximum combinations of goods/services an economy can produce using available resources.

Output

The total amount of goods and services produced.

Market

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

Demand curve

A graph showing the relationship between price and quantity demanded.

Supply curve

A graph showing the relationship between price and quantity supplied.

Law of demand

As price decreases, quantity demanded increases (inverse relationship).

Law of supply

As price increases, quantity supplied increases (direct relationship).

Quantity demanded

The specific amount of a good consumers are willing and able to buy at a certain price.

Quantity supplied

The specific amount of a good producers are willing and able to sell at a certain price.

Demand schedule

A table showing quantities demanded at different prices.

Supply schedule

A table showing quantities supplied at different prices.

Equilibrium

When quantity demanded equals quantity supplied.

Equilibrium (clearing) price

The price where demand and supply intersect.

Equilibrium quantity

The amount bought and sold at the equilibrium price.

Shortage

When quantity demanded exceeds quantity supplied (price is too low).

Surplus

When quantity supplied exceeds quantity demanded (price is too high).

Price controls

Government-imposed limits on prices (ceilings or floors).

Price ceiling

Maximum legal price (often causes shortages).

Price floor

Minimum legal price (often causes surpluses, e.g., minimum wage).

Minimum wage

The legal minimum hourly pay for labor.

Normal good

Demand increases when income increases.

Inferior good

Demand decreases when income increases.

Complement

A good used together with another good (e.g., cars and gasoline).

Substitute

A good that replaces another (e.g., tea and coffee).

Black market

Illegal buying/selling that avoids government regulations or taxes.

Change in demand

A shift of the demand curve caused by income, tastes, related goods, expectations, or population.

Change in supply

A shift of the supply curve caused by input costs, technology, taxes/subsidies, expectations, or number of sellers.

Macroeconomics

The study of the economy as a whole (inflation, unemployment, growth).

Microeconomics

The study of individual decision-making (households, firms, markets).

Inflation

A general rise in prices over time.

Deflation

A general fall in prices over time.

Depression

A severe, prolonged economic downturn.

Unemployment

The share of the labor force actively seeking work but unable to find a job.

Competitive market

A market with many buyers and sellers of the same good or service, where no one can influence the price.

Property rights

The legal rights to own, use, and exchange property and resources.

Input

A resource (land, labor, capital, or entrepreneurship) used in the production of goods and services.

Supply and Demand

The fundamental model of economics that explains how prices and quantities are determined in markets through the interaction of buyers and sellers.