chapter 1

capital

Capital has a number of related meanings in economics, finance and accounting. In finance and accounting, capital generally refers to financial wealth, especially that used to start or maintain a business. In classical economics, capital is one of three factors of production, the others being land and labor.

production possibility frontier

The production possibility frontier (PPF) is a curve depicting all maximum output possibilities for two goods, given a set of inputs consisting of resources and other factors. The PPF assumes that all inputs are used efficiently.

human capitol

1. the collective skills, knowledge, or other intangible assets of individuals that can be used to create economic value for the individuals, their employers, or their community: Education is an investment in human capital that pays off in terms of higher productivity.

consumer

A consumer is a person or organization that uses economic services or commodities. In economic systems consumers are utilities expressed in the decision to trade or not.

economic interdependence

A relationship between two or more people, regions, nations or other entities in which each is dependent on the other for necessary goods or services. Economic interdependence often occurs when all parties are specialized in the fulfillment of some requirements, and must trade with others for unmet requirements.

standard of living

A standard of living is the level of wealth, comfort, material goods and necessities available to a certain socioeconomic class or a certain geographic area.

service

A type of economic activity that is intangible, is not stored and does not result in ownership. A service is consumed at the point of sale. Services are one of the two key components of economics, the other being goods.

entreprenuer

An entrepreneur is an individual who, rather than working as an employee, runs a small business and assumes all the risks and rewards of a given business venture, idea, or good or service offered for sale. ... The reward for taking the risk is the potential economic profits the entrepreneur could earn.

consumer good

Consumer good, in economics, any tangible commodity produced and subsequently purchased to satisfy the current wants and perceived needs of the buyer. Consumer goods are divided into three categories: durable goods, nondurable goods, and services.

specialization

Definition of Specialization. Specialization is when a nation or individual concentrates its productive efforts on producing a limited variety of goods. It oftentimes has to forgo producing other goods and relies on obtaining those other goods through trade.

opportunity cost

Definition: Opportunity cost is the next best alternative foregone. The fundamental problem of economics is the issue of scarcity. Therefore we are concerned with the optimal use and distribution of these scarce resources.

division of labor

Division of labour is an economic concept which states that dividing the production process into different stages enables workers to focus on specific tasks. If workers can concentrate on one small aspect of production, this increases overall efficiency - so long as there is sufficient volume and quantity produced.

value

Economic value is a measure of the benefit provided by a good or service to an economic agent. It is generally measured relative to units of currency, and the interpretation is therefore "what is the maximum amount of money a specific actor is willing and able to pay for the good or service"?

want

Economic wants are defined as desires that can be satisfied by consuming a good, service or leisure activity. Because resources are limited, people cannot have all the goods and services they want; as a result, they must choose some things and give up others.

factors of production

Factors of production is an economic term that describes the inputs that are used in the production of goods or services in order to make an economic profit. The factors of production include land, labor, capital and entrepreneurship.

free enterprise economy

Free enterprise is a type of economy where products, prices, and services are determined by the market, not the government. It's capitalism, not communism. Things that are free are unconstrained, and a business is an enterprise. So, free enterprise refers to an economy where businesses are free from government control.

gross domestic product

Gross domestic product (GDP) is the monetary value of all the finished goods and services produced within a country's borders in a specific time period. Though GDP is usually calculated on an annual basis, it can be calculated on a quarterly basis as well.

land

In economics, land comprises all naturally occurring resources whose supply is inherently fixed[1]. Examples are any and all particular geographical locations, mineral deposits, forests, fish stocks, atmospheric quality, geostationary orbits, and portions of the electromagnetic spectrum.

product market

In economics, the product market is the marketplace in which final goods or services are offered for purchase by consumers, businesses, and the public sector. Focusing on the sale of finished goods, it does not include trading in raw or other intermediate materials.

capital good

In terms of economics one can consider capital goods to be tangible. They are used to produce other goods or services during a certain period of time. Machinery, tools, buildings, computers, or other kind of equipment that is involved in production of other things for sale represent the term of a Capital good.

labor

Labour economics looks at the suppliers of labour services (workers), the demands of labour services (employers), and attempts to understand the resulting pattern of wages, employment, and income. In economics, labour is a measure of the work done by human beings.

trade-offs

Making decisions requires trading off one item against another. In economics, the term trade-off is often expressed as an opportunity cost, which is the most preferred possible alternative. A trade-off involves a sacrifice that must be made to get a certain product or experience.

need

One important idea in economics is that of needs and wants. Needs would be defined as goods or services that are required. This would include the needs for food, clothing, shelter and health care. Wants are goods or services that are not necessary but that we desire or wish for.

production

Production is a process of workers combining various material inputs and immaterial inputs (plans, know-how) in order to make something for consumption (the output). It is the act of creating output, a good or service which has value and contributes to the utility of individuals.

productivity

Productivity is an economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in revenues and other gross domestic product (GDP) components such as business inventories.

scarcity

Scarcity (also called paucity) is the fundamental economic problem of having seemingly unlimited human wants in a world of limited resources. It states that society has insufficient productive resources to fulfill all human wants and needs.

utility

Utility is a term used by economists to describe the measurement of "useful-ness" that a consumer obtains from any good. Utility may measure how much one enjoys a movie, or the sense of security one gets from buying a deadbolt. The utility of any object or circumstance can be considered.

wealth

Wealth measures the value of all the assets of worth owned by a person, community, company or country. Wealth is determined by taking the total market value of all physical and intangible assets owned, then subtracting all debts. Essentially, wealth is the accumulation of resources.

economic growth

increase in the capacity of an economy to produce goods and services, compared from one period of time to another. It can be measured in nominal or real terms, the latter of which is adjusted for inflation.

factor market

marketplace for the services of a factor of production. A factor market facilitates the purchase and sale of services of factors of production, which are inputs like labor, capital, land and raw materials that are used by a firm to make a finished product.

economics

the branch of knowledge concerned with the production, consumption, and transfer of wealth.