Economics Fundamentals and Systems Flashcards

Comprehensive vocabulary flashcards covering the basics of economics, factors of production, economic systems, and major economic philosophies from Modules 1-5.

Economics

The study of the allocation of scarce resources in response to unlimited wants.

Want

Things people would like to have but aren’t necessary for survival.

Need

Essential things people cannot live without, such as food.

Scarcity

A condition where there is not enough of a product, service, or resource to satisfy everyone’s wants at a zero price.

Macroeconomics

The study of economics on a larger scale, focusing on government economic policies and international trade.

Microeconomics

The study of economics on a small scale, such as the behavior of firms, households, and industries.

Opportunity Cost

The highest-valued foregone alternative when any choice is made.

Utility

A measure of happiness or satisfaction used by economists to rank how much different choices bring to a consumer.

Marginal Utility

The choices, big or small, that add a little bit to our overall satisfaction.

Marginal Analysis

The process of comparing the extra benefit received from buying one more of something versus the extra cost.

Marginal Cost

The price paid for something that is equal to the marginal benefit, or good feeling, that the item creates.

Diminishing Marginal Utility

The decrease in additional satisfaction from consuming more and more of a good or service.

Marginal Benefit

The idea of how much enjoyment or satisfaction is gained from an additional unit of consumption.

Utils

The unit of measurement used to quantify utility or how much a consumer is willing to pay for something.

Factors of Production

The four regular elements that go into the production of a good: land, labor, capital, and entrepreneurship.

Land

Natural resources used in production that generate income in the form of rent.

Labor

Human work used in production that generates income in the form of wages.

Capital

Goods that help in the production of other goods, generating income through interest.

Entrepreneurship

The ability to bring all factors of production together, generating income through profits.

Profit Motive

The main goal of an economic activity being to make money.

Market

An exchange between a buyer and a seller.

Product Market

A market where businesses exchange finished products (outputs) for consumers’ money.

Factor Market

A market where businesses buy resources (inputs) such as land, labor, and capital to make products.

Private Property Rights

A safeguard of free enterprise providing the incentive people need to earn, prosper, and grow.

Mixed Socio-capitalist Economy

A combination of free market principles with government involvement to provide for the public good and correct market failures.

Three Basic Economic Questions

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

Traditional Economy

An economic system relying on customs and practices passed down through generations where economic questions are answered by tradition and elders.

Command Economy

An economic system where the government acts as a boss to businesses and makes most economic decisions on production and pricing.

Free Market Economy

A system where individuals and businesses make economic decisions influenced by supply and demand with minimal government mandates.

Adam Smith

The author of the theories of the 'invisible hand' and 'laissez faire' who is known as the father of capitalism.

Invisible Hand

Adam Smith’s concept of a market force that directs consumer demand for goods at fair prices.

Laissez Faire

An economic philosophy where the government remains out of the way to allow companies and natural competition to operate.

Industrial Revolution

A period of transformation from a farming society into one dominated by industrial factory production and technology.

Karl Marx

A German thinker who co-introduced socialism and argued that societies pass through stages toward global stateless communism.

Socialism

A theory advocating that the means of production, distribution, and exchange should be owned or regulated by the community as a whole.

Communism

A political theory advocating for a society in which all property is publicly owned and classes and money are absent.

Capitalism

An economic system in which trade and industry are controlled by private owners for profit rather than by the state.