Business Unit 1: Fundamentals Of Economics

Economics

The study of decisions that go into making, distributing, and using goods and services.

Need

Things you actually need to survive.

Want

Things you desire, but can live without.

Opportunity Cost

What you give up to get something else.

Costs

What you give up to produce a product or provide a service. What you give up to purchase a product or service.

Benefits

What your customer gives up when they purchase a product or service. What you get when you purchase a product or service.

Scarcity

Requires that people decide which goods and services to use or not use due to limited resources and unlimited wants.

Shortage

When demands exceeds supply.

Surplus

When supply exceeds demand.

Supply

How much producers are willing and able to produce at a certain price.

Demand

How much consumers are willing and able to buy at a certain price.

Law Of Demand

Prices increase, demand decreases. Prices decrease, demand increases.

Price Of Inputs

The costs of materials, wages, and everything else that are necessary to produce a product.

Number Of Suppliers

When more suppliers enter a given market, more product is supplied.

Equilibrium

The point at which consumers and producers agree.

Demand Elasticity

The degree to which demand is affected by price.

Elastic Demand

When demand for a product is affects by price.

Land

Refers to natural resources that exist and were not created by people.

Labor

The work, abilities, effort, and skills of the humans that produce a good or service.

Capital

Manufactured goods that are used to produce a good or service.

Entrepreneurship

The ability of people to start new businesses, introduce new products, and improve business processes, and take the risk of business venture.

Traditional Economy

A systems in which customs and traditions controls all economic decisions.

Command Economy

A system in which a central authority controls all economic decisions.

Market Economy

Supply, demand, and a system of pricing allow people to make the economic decisions through free interaction.

Mixed Economic Systems

Not purely traditional, command, or market economies.

Incentive

Encourages specific behavior and helps to motivate individuals to take a specific action.