Economics

Economics

The study of how people use scarce resources to satisfy wants.

Scarcity

Limited resources but unlimited wants.

Incentives

Rewards or penalties that influence behavior.

Goods

Physical items that satisfy wants.

Services

Actions or activities done for others.

Utility

Satisfaction gained from consuming a good or service.

Opportunity Cost

The next best alternative given up.

Economic Theory

A general explanation of economic behavior.

Demand

Willingness and ability to buy a good at various prices.

Law of Demand

As price falls, quantity demanded rises (and vice versa).

Quantity Demanded

Amount consumers are willing to buy at a specific price.

Demand Curve

Graph showing the relationship between price and quantity demanded.

Individual Demand

Demand of one consumer.

Market Demand

Total demand of all consumers.

Substitutes

Goods that can replace each other.

Tastes

Consumer preferences.

Marginal

Additional or extra.

Marginal Utility

Extra satisfaction from one more unit.

Law of Diminishing Marginal Utility

Each additional unit gives less satisfaction.

Elasticity of Demand

Responsiveness of quantity demanded to price changes.

Elastic Demand

Quantity demanded changes greatly with price.

Inelastic Demand

Quantity demanded changes little with price.

Unit Elastic Demand

Proportional change in price and quantity.

Supply

Willingness and ability to sell goods.

Law of Supply

As price rises, quantity supplied rises.

Supply Curve

Graph of price vs. quantity supplied.

Profit

Total revenue minus total costs.

Short Run Production

At least one input is fixed.

Long Run Production

All inputs are variable.

Outsourcing

Hiring outside firms for production.

Total Revenue

Price × Quantity sold.

Fixed Costs

Costs that do not change with output.

Variable Costs

Costs that change with output.

Total Costs

Fixed costs + variable costs.

Markets

Places where buyers and sellers interact.

Price

Amount paid for a good or service.

Equilibrium Price

Price where supply equals demand.

Equilibrium Quantity

Quantity bought and sold at equilibrium.

Surplus

Excess supply.

Shortage

Excess demand.

Rationing

Limited distribution of goods.

Price Controls

Government-set prices.

Price Ceiling

Maximum legal price.

Price Floor

Minimum legal price.

Rent Control

Limits on rent prices.

Minimum Wage

Lowest legal wage.

Microeconomics

Study of individual consumers and firms.

Macroeconomics

Study of the economy as a whole.

Positive Economics

Describes what is.

Normative Economics

Describes what should be.

Efficiency

Using resources with minimal waste.

Underutilization

Resources not fully used.

Employment

Use of labor resources.

Inflation

General rise in prices.

Fixed Income

Income that does not change.

Labor

Human effort in production.

Entrepreneur

Person who starts and manages a business.

Craft Union

Union for skilled workers.

Industrial Union

Union for all workers in an industry.

Strike

Workers stop working.

Picket

Protest outside workplace.

Boycott

Refusal to buy goods.

Lockouts

Employer blocks workers.

Company Unions

Employer-dominated unions.

Collective Bargaining

Negotiations between labor and management.

Mediation

Neutral third party helps negotiate.

Arbitration

Third party makes binding decision.

Injunction

Court order stopping action.

Specie

Coins made of precious metals.

Monetary Unit

Standard measure of money.

Commodity Money

Money with intrinsic value.

Fiat Money

Money with value by government decree.

Representative Money

Paper backed by commodities.

Check

Written order to transfer bank funds.

Fractional Reserve Banking

Banks keep part of deposits.

Federal Reserve System

U.S. central banking system.

Gold Standard

Money backed by gold.

Greenbacks

U.S. paper money first issued in Civil War.

GDP

Total value of final goods/services produced.

Real GDP

GDP adjusted for inflation.

Second-Hand Sales

Used goods; not counted in GDP.

Intermediate Products

Used to make final goods.

Nonmarket Products

Not sold in markets.

Nonmarket Transactions

No money exchange.

Underground Economy

Unreported economic activity.

Poverty Threshold

Minimum income needed to survive.

Welfare

Government aid to the poor.

SNAP

Food assistance program.

Earned Income Tax Credit

Tax credit for low-income workers.

Enterprise Zones

Areas with tax incentives.

Workfare

Welfare requiring work participation.