Term 1: Economics
Definition 1: The systematic study of how goods and services are produced and distributed within an economy. It examines how societies manage their limited resources to satisfy unlimited wants and needs.
Term 2: Market
Definition 2: Historically, a physical location where buyers and sellers would meet to exchange goods and services. Today, it broadly refers to any network (physical or virtual) where buying, selling, and production decisions occur.
Term 3: Production & Profit
Definition 3: * Production: The process of creating goods and services that are then offered for sale in the market. * Profit: The financial gain realized by a producer when the revenue from selling goods and services exceeds the total costs of producing them. Producers are primarily motivated by profit.
Term 4: Factors of Production
Definition 4: The fundamental inputs or resources required to produce any good or service. They are the basic components of a business's production equation.
Term 5: Scarcity
Definition 5: The core economic problem arising from the fundamental conflict between unlimited human wants and needs and limited available resources. Because resources are scarce, choices must be made about how to allocate them.
Term 6: Economic Behavior & Opportunity Cost
Definition 6: * Economic Behavior: How individuals and groups make decisions when faced with the problem of scarcity, typically aiming to maximize their utility (satisfaction) or profit. * Opportunity Cost: The value of the next best alternative that was forgone when a particular choice was made. It represents the true cost of a decision.
Term 7: Law of Demand
Definition 7: All else being equal (ceteris paribus), as the price of a good or service increases, the quantity demanded by consumers decreases. Conversely, as the price decreases, the quantity demanded increases. Consumers buy more at lower prices and less at higher prices.
Term 8: Law of Supply
Definition 8: All else being equal (ceteris paribus), as the price of a good or service increases, the quantity supplied by producers increases. Conversely, as the price decreases, the quantity supplied decreases. Producers are motivated to sell more when prices are higher, as it increases their potential profit.
Term 9: Increasing Marginal Costs
Definition 9: The principle that as a producer increases the output of a good or service, the cost of producing each additional unit (marginal cost) tends to rise. This is often due to the need to use less efficient resources or pay higher prices for additional inputs (like overtime wages).
Term 10: Market Equilibrium, Surplus, and Shortage
Definition 10: These describe the relationship between supply and demand in a market: * Equilibrium Price: The price at which the quantity demanded exactly equals the quantity supplied. At this point, the market "clears," with no excess supply or demand. * Surplus (Excess Supply): Occurs when the quantity supplied exceeds the quantity demanded at a given price (price is too high). This leads to unsold inventory and downward pressure on prices. * Shortage (Excess Demand): Occurs when the quantity demanded exceeds the quantity supplied at a given price (price is too low). This leads to unfulfilled demand and upward pressure on prices.
Term 11: Economic Systems
Definition 11: The fundamental way a society organizes the production and distribution of goods and services.
Term 12: Freedom of Choice & Market Driving Forces
Definition 12: In a market economy, individuals and firms generally have the freedom to acquire, use, and sell resources with minimal restriction. This freedom is driven by two primary forces: * Self-Interest: Individuals (consumers maximizing utility) and firms (producers maximizing profit) act in their own best interests. * Competition: The rivalry among sellers to attract buyers, which typically leads to innovation, lower prices, and higher quality products.
Term 13: Public Goods
Definition 13: Goods or services that are both non-rivalrous (one person's consumption doesn't prevent another's) and non-excludable (it's difficult to prevent anyone from consuming them, even if they don't pay). Due to these characteristics, private markets often fail to provide them efficiently, necessitating government provision.
Term 14: Government Intervention (General)
Definition 14: Actions taken by the government to influence, regulate, or correct outcomes in a market economy.
Term 15: Antitrust Laws
Definition 15: Legislation designed to prevent the formation of monopolies and trusts, promote competition, and protect consumers from unfair business practices and the abuse of economic power.
Term 16: Forms of Taxation (Detailed)
Definition 16: Different methods governments use to collect revenue, influencing income distribution.
Term 17: The Federal Reserve (The Fed)
Definition 17: The central bank of the United States, established in 1913. Its primary role is to ensure a stable financial system and implement monetary policy.
Term 18: Fiscal Policy (Detailed)
Definition 18: The government's use of its spending and taxation powers to influence the economy, primarily to manage aggregate demand.
Term 19: Business Cycle Phases
Definition 19: The natural, recurring fluctuations in economic activity over time, encompassing periods of growth and decline.
Term 20: Inflation
Definition 20: A sustained increase in the general price level of goods and services in an economy over a period of time, leading to a decrease in the purchasing power of money.
Term 21: Tariffs & Protectionism
Definition 21: * Tariff: A tax or duty imposed by a government on imported or exported goods. * Protectionism: The economic policy of restricting imports from other countries through methods like tariffs, quotas, and other regulations.
Term 22: Free Trade
Definition 22: International trade that is unhindered by artificial barriers such as tariffs, quotas, and other restrictions. It allows goods and services to flow freely between countries.
Term 23: Government Budget: Surplus vs
Definition 23: The financial health of a government, comparing its revenues (primarily taxes) to its expenditures (spending).