Economics Semester One

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

Economics: The study of how people, businesses, and governments allocate scarce resources to satisfy their needs and wants.

Need: A basic requirement for survival, such as food, water, and shelter.

Want: A way of expressing a need or something desired but not essential for survival.

Factors of Production: Resources used to produce goods and services, including land, labor, capital, and entrepreneurship.

Land: Natural resources used in production, such as minerals, forests, water, and land itself.

Capital: Tools, equipment, machinery, and factories used in the production of goods and services.

Financial Capital: Money used to buy tools, equipment, and other resources for production.

Entrepreneurs: Individuals who take risks to start businesses, innovate, and bring together factors of production.

Production: The process of creating goods and services by combining resources.

GDP (Gross Domestic Product): The total monetary value of all final goods and services produced within a country in a specific period.

Economic Products: Goods and services that are useful, relatively scarce, and transferable to others.

Good: A tangible product that satisfies wants or needs.

Consumer Good: A good intended for final use by individuals.

Capital Good: A good used to produce other goods and services, such as machinery or tools.

Service: An intangible act or activity that satisfies a need or want, such as healthcare or education.

Value: The monetary worth of a good or service, determined by the market.

Paradox of Value: The contradiction that some necessities, like water, have little monetary value, while non-essentials, like diamonds, are highly valued.

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

Wealth: The accumulation of valuable economic resources, such as goods and services, that are scarce and transferable.

Market: A system or place where buyers and sellers interact to exchange goods and services.

Factor Markets: Markets where productive resources (factors of production) are bought and sold.

Product Markets: Markets where finished goods and services are bought and sold.

Economic Growth: An increase in a country's production of goods and services over time.

Productivity: A measure of the efficiency of production, often expressed as output per unit of input.

Division of Labor: The assignment of specific tasks to different people to improve efficiency.

Specialization: Focusing on a narrow area of expertise or production to increase efficiency and output.

Human Capital: The skills, knowledge, and experience possessed by individuals that enhance their productivity.

Economic Interdependence: The reliance of individuals, businesses, and nations on others to produce goods and services.

Trade-Offs: The alternatives that must be given up when one option is chosen over another.

Opportunity Cost: The value of the next best alternative foregone when making a decision.

Production Possibilities Frontier (PPF): A curve showing the maximum possible combinations of two goods that can be produced with available resources and technology.

Cost-Benefit Analysis: A process of comparing the costs and benefits of a decision or action.

Free Enterprise Economy: An economic system where private businesses operate in competition, largely free of government control.

Standard of Living: The degree of wealth, comfort, material goods, and necessities available to a person or community.

Economic System: The method used by a society to produce, distribute, and consume goods and services.

Traditional Economy: An economic system in which customs, traditions, and beliefs determine the production and distribution of goods and services.

Command Economy: An economic system in which a central authority makes all decisions regarding production and distribution.

Market Economy: An economic system where supply, demand, and price determine the allocation of resources, with little government intervention.

Social Security: A government program that provides financial assistance to people with inadequate or no income, such as retirees and the disabled.

Inflation: The general increase in prices and decrease in the purchasing power of money over time.

Fixed Income: Income that does not increase, even when prices rise, often affecting retirees or others on set payments.

Capitalism: An economic system where private individuals or businesses own capital goods and operate for profit.

Free Enterprise: An economic system where private businesses operate in a competitive environment with minimal government intervention.

Voluntary Exchange: A transaction where buyers and sellers freely and willingly engage in trade, both believing they benefit.

Private Property Rights: The legal right to own and control resources, property, and assets.

Profit: The financial gain made when revenue exceeds the costs of production.

Profit Motive: The incentive to improve material well-being by seeking financial gain.

Competition: The rivalry among sellers to attract customers and achieve higher profits.

Consumer Sovereignty: The concept that consumers have the power to decide what goods and services are produced based on their purchasing decisions.

Mixed Economy/Modified Private Enterprise Economy: An economic system that blends private enterprise with significant government regulation and intervention.

Sole Proprietorship: A business owned and operated by one person.

Unlimited Liability: A situation in which the owner of a business is personally responsible for all of its debts.

Inventory: The stock of goods or materials a business holds for resale or production.

Limited Life: The condition where a business legally ends when the owner dies, quits, or sells the business.

Partnership: A business owned by two or more people who share profits, losses, and management responsibilities.

Limited Partnership: A partnership where at least one partner has limited liability and is not actively involved in management.

Bankruptcy: A legal process allowing individuals or businesses unable to repay debts to seek relief and restructure their obligations.

Corporation: A business recognized as a separate legal entity with the ability to own property, sue, and be sued.

Charter: A legal document issued by the government giving a corporation the authority to operate.

Stock: A share of ownership in a corporation.

Stockholders: Individuals or entities that own shares of stock in a corporation.

Dividend: A portion of a corporation’s profits paid to stockholders.

Common Stock: Shares that provide voting rights and a share of profits, but with no guaranteed dividend.

Preferred Stock: Shares that offer fixed dividends and priority over common stock in asset distribution but lack voting rights.

Bond: A fixed-income investment representing a loan made by an investor to a borrower (typically a corporation or government).

Principal: The original amount of money borrowed or invested.

Interest: The cost of borrowing money or the return earned on investment.

Double Taxation: A situation where corporate profits are taxed, and dividends paid to shareholders are also taxed as personal income.

Merger: The combination of two or more companies into a single entity.

Income Statement: A financial document showing a business’s revenue, expenses, and profits over a specific period.

Net Income: The total profit of a business after all expenses, taxes, and costs are deducted from revenue.

Depreciation: The gradual reduction in the value of a tangible asset over time due to wear and tear or obsolescence.

Cash Flow: The total amount of money being transferred in and out of a business, especially as it relates to liquidity.

Horizontal Merger: The combination of two or more firms producing the same type of product.

Vertical Merger: The combination of firms involved in different stages of production for the same product.

Conglomerate: A corporation composed of multiple businesses operating in unrelated industries.

Multinational: A company that operates in multiple countries.

Nonprofit Organization: An organization that operates to serve a public purpose rather than to generate profit.

Cooperative: A business owned and operated by a group of individuals for their mutual benefit.

Labor Union: An organization of workers formed to protect and advance their rights and interests.

Collective Bargaining: The process by which labor unions and employers negotiate wages, working conditions, and benefits.

Professional Association: A group of individuals in a specialized profession that works to promote the interests of its members.

Chamber of Commerce: A local association of businesses that promotes and protects the interests of the business community.

Better Business Bureau (BBB): A nonprofit organization focused on advancing marketplace trust by providing ratings and reviews for businesses.

Public Utilities: Companies that provide essential services such as water, electricity, and natural gas, often subject to government regulation.

Microeconomics: The branch of economics that focuses on the behavior of individuals and businesses, and how they make decisions regarding the allocation of resources.

Demand: The quantity of a good or service that consumers are willing and able to purchase at various prices during a specific period.

Demand Schedule: A table that shows the quantities of a good or service that consumers will buy at different prices.

Demand Curve: A graphical representation of the demand schedule, showing the relationship between price and quantity demanded.

Law of Demand: The economic principle stating that as the price of a good or service decreases, the quantity demanded increases, and vice versa, all else being equal.

Market Demand Curve: A demand curve that represents the total quantity demanded by all consumers in a market at different prices.

Marginal Utility: The additional satisfaction or benefit a consumer gains from consuming one more unit of a good or service.

Diminishing Marginal Utility: The principle that as a person consumes more of a good or service, the additional satisfaction gained from each additional unit decreases.

Change in Quantity Demanded: A movement along the demand curve caused by a change in the price of the good or service.

Change in Demand: A shift of the entire demand curve, caused by factors such as changes in income, preferences, or prices of related goods, rather than a change in the price of the good itself.

Substitute: A good or service that can replace another, such that an increase in the price of one leads to an increase in demand for the other.

Complement: A good or service that is used in conjunction with another, such that an increase in the price of one leads to a decrease in demand for the other.

Elasticity: A measure of how responsive one variable is to a change in another, such as how demand or supply reacts to changes in price.

Demand Elasticity: The responsiveness of the quantity demanded of a good or service to a change in its price.

Elastic: Describes demand that is highly responsive to changes in price, where the percentage change in quantity demanded is greater than the percentage change in price.

Inelastic: Describes demand that is not very responsive to changes in price, where the percentage change in quantity demanded is less than the percentage change in price.

Unit Elastic: Describes demand where the percentage change in quantity demanded is equal to the percentage change in price.

Supply: The quantity of a good or service that producers are willing and able to offer for sale at various prices over a specific period.

Supply Schedule: A table showing the quantities of a good or service that producers are willing to supply at different prices.

Supply Curve: A graphical representation of the supply schedule, showing the relationship between price and quantity supplied.

Law of Supply: The principle stating that as the price of a good or service increases, the quantity supplied increases, and vice versa, all else being equal.

Market Supply Curve: A supply curve that represents the total quantity supplied by all producers in a market at different prices.

Change in Quantity Supplied: A movement along the supply curve caused by a change in the price of the good or service.

Change in Supply: A shift of the entire supply curve, caused by factors such as changes in production costs, technology, or government policies, rather than a change in the price of the good itself.

Subsidies: Financial assistance or incentives provided by the government to encourage the production or consumption of a good or service.

Supply Elasticity: The responsiveness of the quantity supplied of a good or service to changes in its price.

Theory of Production: The study of how inputs (factors of production) are converted into outputs (goods and services) in the most efficient way.

Short Run: A time period in which at least one input (such as capital) is fixed, and production can only be adjusted by changing variable inputs (like labor).

Long Run: A time period in which all inputs, including capital, can be varied, and producers can fully adjust their production processes.

Law of Variable Proportions: The principle that as the quantity of one input is varied while others are held constant, the resulting changes in output will eventually decrease.

Production Function: A mathematical relationship showing how inputs are combined to produce output.

Total Product: The total output of goods or services produced by a firm using given inputs.

Marginal Product: The additional output produced when one more unit of an input (e.g., labor) is added, holding other inputs constant.

Stages of Production: Phases of production where the marginal product of inputs may increase, reach a maximum, and eventually decline (increasing returns, diminishing returns, and negative returns).

Diminishing Returns: The stage in production where adding more of a variable input to fixed inputs results in smaller increases in output.

Total Cost: The sum of fixed and variable costs incurred in producing goods or services.

Fixed Cost: Costs that do not change with the level of production, such as rent or salaries.

Variable Cost: Costs that vary directly with the level of production, such as raw materials or labor.

Marginal Cost: The additional cost of producing one more unit of output.

Marginal Revenue: The additional revenue earned from selling one more unit of a good or service.

Profit-Maximizing Quantity of Output: The level of production where marginal cost equals marginal revenue, maximizing profit.

Prices: The amount of money required to purchase a good or service, determined by supply and demand in a market.

Rationing: The allocation of limited goods or services to consumers, typically in situations where supply is insufficient to meet demand.

Ration Coupons: A method of rationing in which consumers are given a set number of coupons that allow them to purchase limited amounts of certain goods.

Economic Model: A simplified representation of economic processes used to analyze and predict economic behavior and outcomes.

Market Equilibrium: The point where the quantity of a good or service demanded by consumers equals the quantity supplied by producers, resulting in a stable market price.

Surplus: A situation in which the quantity supplied of a good or service exceeds the quantity demanded, often due to a price that is too high.

Price Ceiling: A maximum price set by the government that producers cannot exceed, often to protect consumers from high prices (e.g., rent controls).

Nonrecourse Loan: A loan in which the lender’s only recourse in the event of default is to seize the collateral, with no further obligation from the borrower.

Deficiency Payments: Payments made by the government to producers when the market price of a good is below a target price, helping to ensure farmers receive a certain income.

Target Price: A government-established price aimed at stabilizing the income of producers by setting a price floor for certain agricultural goods.