Economics Chapter 1, 2, 3
Need
basic requirement for survival (food, clothing, shelter)
Corporation
form of business organization recognized by law as a separate legal entity with all the rights and responsibilities of an individual
Bond
formal contract to repay borrowed money and interest on the borrowed money at regular future intervals
Scarcity
fundamental economic problem facing all societies that results from a combination of scarce resources and people's virtually unlimited wants
Utility
good's or service's capacity to provide
Deprectiation
gradual wear on capital goods during production
Investing in Human Capital
improve productivity when people's skills, abilities, health, and motivation advance
Services
intangible work preformed for someone
Goods
items that are economically useful or satisfy an economic want
Unlimited Liability
requirement that an owner is personally and fully responsible for all losses and debts of a business; applies to proprietorships/ partnerships
Inflation
rise in general level of prices
Entrepreneur
risk taker in search of profits who does something new with existing resources
Paradox of Value
situation where some necessities have little monetary value where as some non-necessities have a much higher value
Inventory
stock of goods held in reserve (finished goods waiting to be sold/ raw materials to be used in production)
Market Economy (example)
supply, demand and the price system help people make decisions and allocate resources (U.S.)
Wealth
the accumulation of goods that are tangible, scarce, useful, and transferable
Voluntary Exchange
the act of buyers and sellers freely and willingly engaging in market transactions that leave both buyer and seller better off
Traditional Economy (example)
the allocation of scarce resources stem from ritual, habit, or custom (Australian Aborigines)
Trade-Offs
the alternative choices people face in making an economic decision
TINSTAAFL
"There Is No Such Thing As A Free Lunch" most things are not free becasue someone has to pay for the production in the first place
Multinational
a corporations that has manufacturing or service operations in a number of different countries
Capitalism
a market economy in which private citizens own that factors of production
Circular Flow of Economic Activity
a model showing the basic economic relationships within a market economy
Lemon Law
allow new car buyers to return their cars if they have too many repairs
Principal
amount borrowed when getting a loan or issuing a bond
Economic System
an organized way of providing for the wants and needs of people
Limited Partnership
at least on partner is not active in the daily running of the business
How Government Interacts w/Business
business regulation- states set up insurance companies' rates, administrated licensing exams, and generally protect consumer interests business develoment- state offer an incentive such as a tax credit/ reduction in taxes, in return for the creation of new jobs/ new business investment
Command Economy (example)
central authority makes most of the major economic decisions (North Korea)
Stock
certificate of ownership in a corporation; common or preferred stock
Dividend
check paid to stockholders, usually quarterly, representing portion of corporate profits
Merger
combination of two or more business enterprises to form a single firm; one gives up its separate legal identity
Conglomerate
companies that have at least four businesses making unrelated products, none of which is responsible for a majority of its sales
Public Utilities
company providing essential services such as water and electricity to consumers, usually subject to some government regulations
Bankruptcy
court-granted permission to an individual or business to cease or delay payment on some or all debts for a limited amount of time
Economic Growth
depends on high productivity that may be affected by its interdependence
Division of Labor
division of work into a number of separate tasks to be performed by different workers
Economic Interdepenence
economic actives in one part of the country or world affect what happens elsewhere
Non-Profit Organization
economic institution that operates like a business but does not seek financial gain (schools, churches)
Free Enterprise
economy in which competition is allowed to flourish with a minimum of government interference; term used to describe the American economy
Profit
extent to which persons or organizations are better off at the end of a period than they were at the beginning
Double Taxation
feature of taxation that allows stockholders' dividends to be taxed both as corporate profit and as personal income
Social Security
federal program of disability and retirement benefits that covers most working people
Factors of Production
labor- people with all their efforts, abilities, and skills land- natural resources not created by humans entrepreneurs- risk taker in search of profits who does something new with existing resources capital- tools, equipment, machinery, and factories used in the production
Market
location or mechanism for buyers and sellers to trade
Net Income
measure of business profits determined by subtracting all expenses, including taxes, from revenues
Productivity
measure of the amount of output produced by the amount of inputs within a certain time
Cooperative
nonprofit association performing some kind of economic activity for the benefit of its members
Professional Association
nonprofit organization of professional or specialized workers seeking to improve working conditions, skill levels, and public perceptions of its profession
Credit Union
nonprofit service cooperative that accepts deposits, makes loans, and provides other financial services
Scarcity
one can not get enough to satisfy needs and watns
Labor Union
organization that works for its members' interests concerning pay, working hours, health coverage, fringe benefits, other job related matters
Interest
payment made for the use of borrowed money
Mixed (Market) Economy
people carry on their economic affairs freely but are subject to some government intervention and regulation
Consumers
people who purchases goods and services for personal use
Shareholders
person who owns a share or shares of stock in a corporation
Collective Bargaining
process of negotiation between union and management representatives over pay, benefits, and job-related matters
Opportunity Cost
the cost of the next best alternative among a person's choices
Profit Motive
the driving force that encourages people and organizations to improve their material well-being
Production
the process of creating goods and services
Standard of Living
the quality of life based on the possession of the necessities and luxuries that make life easier
Economic Freedom
the right of individuals and organizations to pursue their own interests through voluntary exchange of goods and services under the rule of law
Competition
the struggle among sellers to attract consumers while lowering costs
Free Enterprise
there is limited government interference and businesses are free to compete
Cash Flow
total amount of new funds the business generates from operations, includes both net income and non-cash charges
Partnership
unincorporated business owned and operated by two or more people who share the profits and have unlimited liability for the debts and obligations of the firm
Proprietorship
unincorporated business owned and run by a single person who has rights to all profits and unlimited liability for all debts of the firm; most common form of business organization in the U.S.
Want
way of expressing or communicating a need
3 Basic Question
what to produce how to produce for whom to produce
Value
worth expresed in dollars and cents
Charter
written government approval to establish a corporation
