Economic vocab

Demand

A consumer's willingness and ability to purchase a good or service at various prices over a specific period of time.

Law of Demand

The principle stating that as the price of a good increases, quantity demanded decreases, and as price decreases, quantity demanded increases.

Demand Curve

A graph illustrating how the quantity demanded of a product changes in response to changes in price.

Elasticity of Demand

A measure of how responsive the quantity demanded of a product is to a change in its price.

Inelastic Demand

A market condition where consumer demand remains largely unchanged despite changes in price.

Substitution Effect

The shift in consumer demand for a product caused by price changes in a similar alternative good.

Complementary Products

Goods that are typically consumed together, where a price change in one affects demand for the other.

Scarcity

The fundamental economic problem of having limited resources to meet unlimited wants and needs.

Economics

The study of how individuals and societies choose to allocate limited resources to satisfy their needs and wants.

Shortage

A market condition where the quantity supplied of a product is less than the quantity demanded at a given price.

Needs

Basic goods or services required for human survival, such as food, clothing, and shelter.

Wants

Desires for goods or services that are not essential for survival.

Paradox of Value

The contradiction where essential items have low monetary value while nonessential items have high monetary value.

Marginal Utility

The extra satisfaction gained from consuming one additional unit of a good or service.

Opportunity Cost

The value of the next best alternative given up when making a choice.

Trade-Offs

The set of all alternative choices given up when selecting one option over others.

Factors of Production

The four fundamental inputs used to produce goods and services: land, labor, capital, and entrepreneurship.

Physical Capital

Human-made objects used to manufacture other goods and provide services.

Entrepreneur

An individual who combines land, labor, and capital to create goods or services while accepting the financial risks.

Supply

The relationship between the price of a good and the amount producers are willing and able to bring to market.

Equilibrium Price

The price level where the quantity demanded by consumers equals the quantity supplied by producers.

Price Floor

A legal minimum price set by government regulations above which a good or service cannot be sold.

Consumer Surplus

The financial benefit gained when consumers pay less for a product than the maximum price they were willing to pay.

Production Possibility Curve (PPC)

A graphical representation showing maximum output combinations of two goods an economy can produce given fixed resources.

Comparative Advantage

The ability of an individual or nation to produce a good or service at a lower opportunity cost than competitors.