Economics and Market Structures: Key Concepts for Students

Capitalism

The private ownership of resources by individuals rather than by the government.

Demand

Quantity of a service that consumers want.

Economic decision making

The process of choosing which needs and wants, among several, you will satisfy using the resources you have.

Economic resource

The means through which goods and services are produced.

Economies of scale

A proportionate saving in costs gained by an increased level of production.

Equilibrium price and quantity

The point at which the supply and demand curves meet.

Fixed costs

Business expenses that remain constant and are not affected by the volume of goods or services a company produces or sells.

Marginal benefit

The additional benefit arising from a unit increase in a particular activity.

Marginal cost

The cost added by producing one additional unit of a product or service.

Opportunity cost

The loss of potential gain from other alternatives when one alternative is chosen.

Profit

The difference between the revenues earned by a business and the costs of operating the business.

Scarcity

When people's needs and wants are unlimited but the resources to meet those needs and wants are limited.

Supply

Quantity of a good and sales.

Variable costs

The expenses a business incurs that change with the amount of goods produced or services provided.

Elastic demand

The price is changing the demand based on price.

Inelastic demand

A change in price has little effect on the demand.

Natural resources

Oil, Gas, Metal.

Human resources

Workers, Boss, Accountant.

Capital resources

Ware House, Machines, delivery Trucks.

Law of Diminishing Returns

If one factor of production (natural resource, human resource, capital resource) is increased while others stay the same, the resulting increase in output will level off after some time and then will decline.

Roles of entrepreneurs

Supplying the Demand, Capital Investment, Job Creation, Competition, Change Agent.

Economic questions

1. What goods and services will be produced? 2. How will they be produced? 3. For whom will the goods and services be produced?

Command Economy

When the government decides how, what, whom, e.g., North Korea.

Market Economy

Individuals and businesses have a choice what they produce.

Traditional Economy

Goods and services are made traditionally.

Mixed Economy

A mixed economy combines command and market economies.

Private Property

Owned and operated privately, dispose of things legally.

Freedom of Choice

Can make anything that they want, the government can step in if the thing that you are creating is harmful.

Competition

The rivalry between businesses for customers, market share, and limited resources, where companies strive for quality and price.

Functions of Business

1. Production of a good or service 2. Marketing of the good or service to consumers 3. Management 4. Finance.

Benefits of Economies of Scale

Use economies of scale to gain a competitive advantage by reducing the average cost of production per unit through increased output, leading to lower prices, higher profits, improved innovation, greater bargaining power with suppliers, and expanded market share.

Perfect Competition

A theoretical market where many sellers offer identical products, with no single seller able to influence the price, and buyers and sellers having perfect information and no barriers to enter or exit the market.

Monopolistic Competition

A market where many firms sell similar, but not identical, products. These products are differentiated through branding, quality, or location, giving each firm some control over its price.

Oligopoly

A small number of businesses gain the majority of total sales revenue, sellers sell similar products that are related and can influence price, with few businesses dominating.

Monopoly

A market structure where a single seller or producer controls the entire market for a product or service, with no close substitutes and high barriers to entry.