Basic Economic Terms

Market

Exist whenever buyers and sellers exchange goods and services; a market is a setting where buyers and sellers establish prices for identical or very similar products.

Trade-off

Involves getting a little more of one option in exchange for a little less of something else; a measure of what you decided give up.

Inflation

Is an increase in the average price level of goods and services

Money

Is any generally accepted medium of exchange; a good that can be used to buy all other goods and services.

A price

Is the amount of money that people pay when they buy a good or service; a measure of value that consumers can use in deciding whether to purchase a good or service.

Surplus

Is the condition in which the quantity demanded is greater than the quantity supplied.

Shortage

Is the condition in which the quantity demanded is less than the quantity supplied.

Scarcity

Is the condition of not being able to have all of the goods and services you want. Scarcity results from the imbalance between relatively unlimited wants and limited resources.

Profit

Is the difference between revenues and the costs of producing or selling a good or service; it is the incentive that persuades entrepreneurs and business firms to take the risk of producing goods and services.

Barter

Is the direct trading of goods and services; the trading of goods and services without using money.

International Trade

Is the exchange of goods and services between people and institutions in different nations.

Opportunity cost

Is the highest valued alternative that must be foregone because another option is chosen; what you give up to get something is its opportunity cost.

Economic System

Is the institutional framework that a society uses to allocate its resources to produce and distribute goods and services.

Market Clearing Price or Equilibrium Price

Is the one price level at which quantity supplied equals quantity demanded.

Demand

Is the schedule of how much consumers are willing and able to buy at all possible prices in a given period of time.

Supply

Is the schedule of how much producers are willing and able to sell at all possible prices in a given period of time.

Economics

Is the study of how people use resources to produce and distribute goods and services.

Exchange

Is the trading of goods and services with people for other goods and services or for money.

Specialization

Occurs when people produce a smaller number of goods and services than they consume.

Economic Choice

Occurs whenever someone makes a personal decision to use limited resources.

Productivity

Refers to a ratio of output produced per unit of input over some period of time. Productivity is usually measured as output per worker. It can also be measured as output per hour, per machine, or per unit of land.

Entrepreneurship

Refers to the human resources that assume the risk or organizing others resources to produce goods and services.

Human resources

represent the quantity and quality of human effort directed toward producing goods and services.

Services

Are activities that can satisfy peoples wants.

Productive Resources

Are all natural resources, human resources, and human-made resources used in the production of goods and services.

Economic wants

Are desires that can be satisfied by consuming a good or service.

Natural Resources

Are gifts of nature; they are present without human intervention.

Imports

Are good and services bought from sellers in another nation.

Exports

Are goods and services produced in one nation but sold to buyers in another nation.

Capital resources

Are goods made by people and used to produce other good sand services.

Goods

Are objects that can satisfy people's wants.

Producers

Are people who make goods and provide services.

Consumers

Are people whose wants are satisfied by using goods and services; people who use goods and services.