economics 1

Scarcity

exists because resources are limited while human wants are unlimited.

Economics

The study of how people, businesses, and governments make choices about using limited resources to satisfy wants and needs.

Needs

Things required for survival, such as food, water, shelter, and clothing.

wants

Things people desire that are not necessary for survival, such as entertainment, luxury items, or brand-name products.

Producer

A person or business that makes goods or provides services.

Opportunity Cost

The value of the next best alternative that is given up when a decision is made.

Private Goods

Goods provided by the government that everyone can use without paying directly (ex: roads, national defense, public parks).

Consumer

A person who buys or uses goods and services.

Factors of Production

The resources used to produce goods and services: land, labor, capital, and entrepreneurship.

demand

The amount of a good or service consumers are willing and able to buy at different prices.

supply

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

Redistribution of Income

The government’s use of taxes and spending to reduce income inequality.

Proportional Tax

A tax where everyone pays the same percentage of their income.

Regressive Tax

A tax that takes a larger percentage of income from low-income earners than from high-income earners.

Progressive tax

A tax where higher-income earners pay a larger percentage of their income.

Business Cycle

The rise and fall of economic activity over time, including expansion and recession.

GDP (Gross Domestic Product)

The total value of all final goods and services produced in a country in one year.

CPI (Consumer Price Index)

A measure of the average change in prices paid by consumers for goods and services.

Economic Indicator

A statistic used to measure economic performance, such as GDP, CPI, or unemployment rate.

Budget Surplus

More money collected (taxes) than spent (public goods)

Budget Deficit

More money spent (public goods) than collected (taxes)

Revenue

The income the government receives, mainly from taxes.

National Debt

The total amount of money the government owes from past budget deficits.

Inflation

A general increase in prices and decrease in the purchasing power of money.

Unemployment

The condition in which people who are willing and able to work cannot find jobs.

Federal Reserve System

The central banking system of the United States that manages the money supply and interest rates.

Policy

A plan or course of action adopted by the government or an institution.

Fiscal Policy

Government decisions about spending and taxation to influence the economy.

Monetary Policy

The Federal Reserve’s actions to control the money supply and interest rates.

Securities

Financial assets such as stocks and bonds that can be bought and sold.

Open Market Operations

The buying and selling of government securities by the Federal Reserve to control the money supply.

Money Supply

The total amount of money available in the economy.

market economy

individuals make decisions

command economy

one central authority makes the decisions

Traditional economy

economy based on customs and traditions

mixed economy

a combination of elements from market and command economies

surplus

if the supply is greater than the demand

shortage

if the demand is greater than the supply

Corporate Income Tax

a tax business must pay on income

Excise Tax

Taxes used on specific goods like alcohol & tobacco 

Sales Tax

taxes applied to goods/services (retail). 

Property Tax

tax on the value of real estate property.