economic vocab

opportunity cost

the value of your next best alternative whenever you make a choice

impulse purchase

a purchase made on a ‘whim’ without much thought

needs

the items necessary for maintaining physical life

wants

items beyond basic needs that improve your quality of life

values

the principals by which a person lives

personal preferences

your tastes or likes and dislikes

economic system

the process used by a society to decide what to produce, how to produce it, and for whom to produce

communist economic system

the government owns and controls most resources

socialist economic system

the government controls most of the decisions for the nation

hands-on systems

the government controls most decisions on what’s produced

hands-off systems

government has limited control and decisions are made by the people

traditional economic systems

the people decide what decisions will be made

capitalism

producers and consumers are free to operate and compete in business with little government interference

mixed economy

individual freedoms and government decisions determine which goods and services are produced - everyone works together

producers

are manufacturers of goods and services for sale

consumers

are the buyers

scarcity

consumers wants are unlimited while resources are not

opportunity cost

the value of the choice you did not select

supply

the quantity of goods and services that producers can provide at varying prices

demand

the willingness and ability of consumers to purchase goods and services at varying prices

equilibrium price

when quantity supplied equals quantity demanded

competition

the rivalry among sellers in the same market to win customers

oligopoly

only a few sellers produce a similar product or service

monopoly

a market with many buyers but only in seller

making smart and rational decisions

• comparison shopping will allow you to determine whether you’re getting the best quality

• the lost or trade-off of choosing one thing over another

decisions based on values

• you will decide what you want based on your values and personal preferences

• how you decided to hat is right or wrong

• they usually come from our parents and how we were raised

economic systems

three major types:

• hands-on systems

• hands-off systems

• mixed economic systems

hands-off

follows laissez-faire - government should not interfere in the economy except to protect a person’s rights. The power belongs to individuals and businesses

mixed market economic systems

• the government produces some goods and services

• it creates price control - ex. minimum wage

• most nations have some sort of mixed economy

market economy

consumers play a key role in determining what’s produced

scarcity more into depth

• when you decide how to use your limited resources (time and money), you are considering the opportunity cost of the alternative

• your spending decisions determine which products succeed in the market and which one fail

• producers take causes from the marketplace to know which products will be profitable

supply and demand

if enough consumers demand and products and are willing and able to pay for it, producers will willing to produce and sell it

• you want it, they’ll make it

demand:

• increased prices

• creates competition in the market

• creates more supply in the market

• drives the price down

consumer power

by picking and choosing where you spend your money, you determine what is produced and at what price

parts of economic systems 1

• must exist for prices to rise and fall

• pure competition allows for improved quality and lower prices

• tariffs

tariffs

by raising the price of imported goods, it encourages consumers to buy locally made products

parts of the economic systems 2

must have purchasing power

• the dollar’s purchasing power increases or decreases with economy

• during inflation, prices are high and purchasing power decrease

parts of the economic system 3

• know your rights and responsibilities

• compare products and prices - read reviews and leave reviews

• help weed out poor products and keep prices reasonable