Economics Key Terms: Scarcity, Goods, Services, and Market Systems

Scarcity

The fundamental economic problem of having seemingly unlimited human wants in a world of limited resources.

Good

A tangible product that can be purchased, such as food, clothing, or electronics.

Service

An intangible activity or benefit provided to consumers, such as healthcare or education.

Durable good

A good that does not wear out quickly and provides utility over time, such as cars or appliances.

Nondurable good

A good that is consumed quickly or has a short lifespan, such as food or paper products.

Consumer good

Goods that are purchased by consumers for personal use.

Capital good

Goods used in the production of other goods or services, such as machinery or tools.

Utility

The satisfaction or benefit derived from consuming a good or service.

Wealth

The total value of all assets owned by an individual or entity, minus liabilities.

Land

Natural resources used in the production of goods and services.

Capital

Financial assets or physical assets used in the production of goods and services.

Labor

The human effort, both physical and mental, used in the production of goods and services.

Entrepreneurs

Individuals who take risks to start and manage businesses, seeking profit.

Production Possibilities Curve

A graph that shows the maximum feasible amount of two goods that can be produced with available resources.

Marginal Decision Making

The process of making decisions based on the additional benefit versus the additional cost.

Ceteris Paribus

A Latin phrase meaning 'all other things being equal,' used in economic analysis.

Opportunity Cost

The value of the next best alternative that is forgone when making a decision.

Trade-offs

The alternatives that must be given up when making a choice.

Consumerism

A social and economic order that encourages the acquisition of goods and services in ever-increasing amounts.

Economic growth

An increase in the production of goods and services in an economy over time.

Productivity

The efficiency of production, often measured as the output per unit of input.

Human Capital

The skills, knowledge, and experience possessed by an individual or population.

Division of labor

The assignment of different parts of a manufacturing process or task to different people to improve efficiency.

Specialization

The process of focusing on a specific task or area of production to increase efficiency.

Economic Interdependence

A situation in which producers and consumers in different countries rely on each other for goods and services.

Market

A place where buyers and sellers come together to exchange goods and services.

Factor Markets

Markets where factors of production, such as labor and capital, are bought and sold.

Product Markets

Markets where final goods and services are offered to consumers.

Economic Model

A simplified representation of economic processes used to predict outcomes.

Cost-Benefit Analysis

A systematic approach to estimating the strengths and weaknesses of alternatives in order to determine the best option.

Free Enterprise Economy

An economic system where private businesses operate in competition and are free of state control.

Standard of Living

The level of wealth, comfort, material goods, and necessities available to a certain socioeconomic class in a certain geographic area.

Traditional Economy

An economic system that relies on customs, history, and time-honored beliefs.

Economic Systems

The means by which countries and governments distribute resources and trade goods and services.

Command Economy

An economic system in which the government controls the production and distribution of goods and services.

Socialism

An economic system where the means of production are owned and regulated by the community as a whole.

Market Economy

An economic system where supply and demand determine prices and production.

Capitalism

An economic system characterized by private ownership of the means of production and their operation for profit.

Mixed Economies

Economic systems that combine elements of both capitalism and socialism.

Great Depression

A severe worldwide economic depression that took place during the 1930s.

Communism

A political and economic ideology advocating for a classless system in which the means of production are owned communally.

Voluntary exchange

The act of buyers and sellers freely and willingly engaging in market transactions.

Private Property Rights

The rights of individuals to own and control their possessions as they wish.

Profit

The financial gain obtained when the revenue from sales exceeds the costs of production.

Profit motive

The desire for financial gain as an incentive for economic activity.

Competition

The rivalry among sellers in the same market to attract customers.

Modified Free Enterprise

An economic system that includes some government intervention while still allowing for private enterprise.

Market Failure

A situation in which the allocation of goods and services is not efficient.

Externality

A consequence of an economic activity that affects other parties without being reflected in the costs of the goods or services involved.

Great Recession

A severe worldwide economic crisis that occurred from 2007 to 2009.

Consumer

An individual who purchases goods and services for personal use.

Sovereignty

The authority of a state to govern itself or another state.

Minimum Wage

The lowest remuneration that employers can legally pay their workers.

Social Security

A government program that provides financial assistance to individuals during retirement or in times of disability.

Medicare

A federal health insurance program for people aged 65 and older, and for some younger people with disabilities.

Medicaid

A joint federal and state program that helps with medical costs for some people with limited income.

Inflation

The rate at which the general level of prices for goods and services rises, eroding purchasing power.

Fixed Income

Income that does not change and is typically received on a regular basis, such as pensions or annuities.