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.

Modified Free Enterprise – An economy mainly based on markets with some government regulation.

Demand & Consumer 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.

Utility & Marginal Analysis

Marginal – Additional or extra.

Marginal Utility – Extra satisfaction from one more unit.

Law of Diminishing Marginal Utility – Each additional unit gives less satisfaction.

Elasticity

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.

Elasticity – Measure of responsiveness in general.

Supply & Production

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.

Costs & Revenue

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 & Prices

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

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.

Micro & Macro Economics

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 & Unions

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.

Money & Banking

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.

National Income & GDP

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 & Government Programs

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.