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