Economics Vocabulary Practice Flashcards

A comprehensive collection of 60 vocabulary terms covering fundamental economic concepts, business organizations, supply and demand dynamics, and market structures.

Value

The worth of a product, expressed in dollars and cents, as determined by utility and scarcity.

Economics

The social science that studies how individuals, institutions, and society make optimal choices under conditions of scarcity.

Capital

Human-made resources (machinery, tools, buildings) used to produce goods and services; also called capital goods.

Scarcity

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

Opportunity Cost

The value of the next-best alternative that must be foregone to obtain a certain item.

Trade-offs

The alternative choices that are given up when making a decision.

Standard of Living

The quality of life based on the possession of necessities and luxuries that make life easier.

Good

A physical object that is economically useful or satisfies an economic want, such as a consumer or capital good.

Consumption

The process of using goods and services to satisfy wants and needs.

Need

A basic requirement for survival, such as food, clothing, or shelter.

Want

A desire that can be satisfied by consuming a good, service, or leisure activity, but is not necessary for survival.

Service

Work or labor performed for someone else.

Production

The process of creating goods and services.

Free Enterprise Economy

A system where consumers and privately owned businesses, rather than the government, make the majority of the decisions.

Social Security

A federal program of disability and retirement benefits that covers most working people.

Profit Motive

The driving force that encourages individuals and organizations to improve their material well-being.

Fixed Income

An income that does not increase even when prices go up.

Capitalism

An economic system where private citizens own and use the factors of production to generate profits.

Command Economy

An economic system in which the government makes all decisions regarding production and consumption.

Mixed Economy

An economic system that combines elements of market, command, and/or traditional economies.

Profit

The extent to which persons or organizations are better off financially at the end of a period than they were at the beginning.

Sole-Proprietorship

A business owned and run by a single person.

Depreciation

The gradual wear and tear on capital goods over time.

Corporation

A form of business organization recognized by law as a separate legal entity with all the rights of an individual.

Multinational

A corporation that has manufacturing or service operations in a number of different countries.

Interest

The payment made for the use of borrowed money.

Partnership

A business that is owned by two or more people.

Net Income

The funds remaining after all of a business's expenses, including taxes and depreciation, are deducted from its total revenue.

Stock

A certificate of ownership in a corporation.

Collective Bargaining

Negotiations between representatives of labor unions and management to determine pay and acceptable working conditions.

Demand

The desire, willingness, and ability to buy a good or service.

Marginal Utility

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

Elasticity

A measure of responsiveness that tells how a dependent variable, such as quantity demanded, responds to a change in an independent variable, such as price.

Substitute

A product that can be used in place of another product.

Microeconomics

The branch of economic theory that deals with behavior and decision making by small units, such as individuals and firms.

Change in Quantity Demanded

A movement along the demand curve that shows a change in the quantity of the product purchased in response to a change in price.

Substitution Effect

The change in quantity demanded of a good that results from a change in price, making the good more or less expensive relative to substitute goods.

Change in Demand

A shift of the demand curve, meaning consumers are willing to buy different amounts of a product at the same prices.

Law of Demand

The rule stating that more of a product will be purchased at low prices than at high prices.

Complements

Products that increase the value of other products; the use of one increases the use of the other.

Diminishing Marginal Utility

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

Supply

The amount of a good or service that producers are willing and able to sell at various prices.

Fixed Cost

Costs of production that do not change when output changes (e.g., rent).

Variable Cost

Production costs that change when output changes (e.g., labor, raw materials).

Total Revenue

The total amount earned by a firm from the sale of its products ($Price \times Quantity$).

Break-even Point

The level of production where total costs equal total revenue.

Law of Supply

The principle that suppliers will normally offer more for sale at high prices and less at lower prices.

Change in Supply

A situation where suppliers offer different amounts of products for sale at all possible prices in the market, shifting the supply curve.

Total Cost

The sum of fixed costs and variable costs.

Marginal Cost

The extra cost incurred when producing one additional unit of a product.

Laissez-faire

The philosophy that government should not interfere with commerce or in the affairs of business.

Natural Monopoly

A market situation where the costs of production are minimized by having a single firm produce the product.

Perfect Competition

A market structure with many well-informed and independent buyers and sellers who exchange identical products.

Externality

An economic side effect that affects an uninvolved third party (can be positive or negative).

Price Fixing

An agreement, illegal, by firms to charge the same price for a product.

Collusion

A formal agreement to set prices or to otherwise behave in a cooperative manner, often illegal.

Oligopoly

A market structure in which a few large sellers dominate the industry.

Monopoly

A market structure with only one seller of a particular product.

Trust

Illegal combinations of corporations or companies organized to hinder competition.

Merger

A combination of two or more business enterprises to form a single firm.