Intro to Business - Economics

Traditional Economy

An economy in which production is based on customs and traditions and economic roles are typically passed down from one generation to the next.

Command Economy

An economic system in which the government controls a country's economy.

Market Economy

Economic decisions are made by individuals or the open market.

Mixed Economy

An economy in which private enterprise exists in combination with a considerable amount of government regulation and promotion.

Law of Supply

Tendency of suppliers to offer more of a good at a higher price

Law of Demand

Consumers buy more of a good when its price decreases and less when its price increases

Economics

The study of how people seek to satisfy their needs and wants and manage scarce resources by making choices

Free Enterprise System

An economic system characterized by private or corporate ownership of capital goods, competition among businesses, and interaction of supply and demand

Opportunity Cost

Cost of the next best alternative use of money, time, or resources when one choice is made rather than another

Scarcity

A situation in which unlimited wants exceed the limited resources available to fulfill those wants

PACED decision-making process

state the Problem

list Alternatives

identify Criteria

Evaluate alternatives

make a Decision

Shortage

A situation in which quantity demanded is greater than quantity supplied

Surplus

A situation in which quantity supplied is greater than quantity demanded

Equilibrium

A situation in which the market price has reached the level at which quantity supplied equals quantity demanded

Inflation

A general and progressive increase in prices

Expansion

A period of economic growth as measured by a rise in real GDP

Recession

A period of reduced economic activity characterized by lower demand

Gross Domestic Product (GDP)

A measurement of the total goods and services produced within a country.

Unemployment Rate

The portion of people in the labor force who are not working

Standard of Living

Quality of life based on ownership of necessities and luxuries that make life easier.

Productivity

The quantity of goods and services produced from each unit of labor input

Business Cycle

Fluctuations in economic activity, such as employment and production

Factors of Production

Natural resources, labor, capital, and entrepreneurship; the three groups of resources that are used to make all goods and services

Consumer Price Index

The key measure of inflation- the change in the cost of buying a fixed basket of goods and services.

Unemployment Rate

the percentage of the nation's labor force that is unemployed