Vocabulary Economics Principles Practices
utility
(1) ability or capacity of a good or service to be useful and give satisfaction to someone
trade-off
(1) alternative that must be given up when one is chosen rather than another
paradox of value
(1) apparent contradiction between the high value of nonessentials and low value of essentials
specialization
(1) assignment of tasks so that each worker performs fewer functions more frequently; same as division of labor
need
(1) basic requirement for survival; includes food, clothing, and/or shelter
opportunity cost
(1) cost of the next best alternative use of money, time, or resources when one choice is made rather than another
productivity
(1) degree to which productive resources are used efficiently; normally refers to labor, but can apply to all factors of production
production possibilities frontier
(1) diagram representing maximum combinations of goods and/or services an economy can produce when all productive resources are fully employed
division of labor
(1) division of work into a number of separate tasks to be performed by different workers; same as specialization
economic interdependence
(1) economic activities in one part of the country or world affect what happens elsewhere
scarcity
(1) fundamental economic problem facing all societies that results from a combination of scarce resources and people's virtually unlimited wants
consumer good
(1) good intended for final use by consumers rather than businesses
economic product
(1) good or service that is useful, relatively scarce, and needs of its people
free enterprise economy
(1) market economy in which privately owned businesses have the freedom to operate for a profit with limited government intervention; same as private enterprise economy
product market
(1) market where goods and services are offered for sale
factor market
(1) market where productive resources are bought and sold
market
(1) meeting place or mechanism allowing buyers and sellers of an economic product to come together; may be local, regional, national, or global
financial capital
(1) money used to buy the tools and equipment used in production
land
(1) natural resources or "gifts of nature" not created by human effort; one of four factors of production
labor
(1) people with all their abilities and efforts; one of four factors of production, does not include the entrepreneur
production
(1) process of creating goods and services with the combined use of land, capital, labor, and entrepreneurship
factors of production
(1) productive resources that make up the four categories of land, capital, labor, and entrepreneurship
entrepreneur
(1) risk-taking individual in search of profits; one of four factors of production
economics
(1) social science dealing with the study of how people satisfy seemingly unlimited and competing wants with the careful use of scarce resources
human capital
(1) sum of peoples' skills, abilities, health, and motivation
wealth
(1) sum of tangible economic goods that are scarce, useful, and transferable from one person to another; excludes services
economic growth
(1) sustained period during which a nation's total output of goods and services increases
good
(1) tangible economic product that is useful, relatively scarce, transerfable to others; used to satisfy wants and needs
capital good
(1) tool, equipment, or other manufactured good used to produce other goods and services; a factor of production
capital
(1) tools, equipment and factories used in the production of goods and services; one of four factors of production
want
(1) way of expressing or communicating a need; a broader classification than needs
service
(1) work or labor performed for someone; economic product that includes haircuts, home repairs, forms of entertainment
value
(1) worth of a good or service as determined by the market
gross domestic product (GDP)
(1, 13) dollar value of final goods, services, and structures produced within a country's national borders during a one-year period
standard of living
(1, 13) quality of life based on ownership of necessities and luxuries that make life easier
cost-benefit analysis
(1, 20) way of thinking that compares the cost of an action to its benefits
voluntary exchange
(2) act of buyers and sellers freely and willingly engaging in market transactions; characteristic of capitalism and free enterprise
profit motive
(2) driving force that encourages people and organizations to improve their material well-being; characteristic of capitalism and free enterprise
command economy
(2) economic system characterized by a central authority that makes most of the major economic descisions
market economy
(2) economic system in which supply, demand, and the price system help people make decisions and allocate resources; same as free enterprise economy
traditional economy
(2) economic system in which the allocation of scarce resources and other economic activity is the result of ritual, habit, or custom
free enterprise
(2) economy in which competition is allowed to flourish with a minimum of government interference; term used to describe the American economy
profit
(2) extent to which persons or organizations are better off at the end of a period than they were at the beginning; usually measured in dollars
social security
(2) federal program of disability and retirement benefits that covers most working people
private property rights
(2) fundamental feature of capitalism, which allows individuals to own and control their possessions as they wish; includes both tangible and intangible property
fixed income
(2) income that does not increase even though prices go up
economic system
(2) organized way a society provides for the wants and needs of its people
consumer sovereignty
(2) role of consumer as ruler of the market when determining the types of goods and services produced
inflation
(2, 13) rise in the general level of prices
capitalism
(2, 18) economic system in which private citizens own and use the factors of production in order to generate profits
modified private enterprise economy
(2, 20) free enterprise market economy where people carry on their economic affairs freely, but are subject to some government intervention and regulation
principal
(3) amount borrowed when getting a loan or issuing a bond
Better Business Bureau
(3) business-sponsored nonprofit organization providing information on local companies to consumers
stock
(3) certificate of ownership in a corporation; common or preferred stock
dividend
(3) check paid to stockholders, usually quarterly, representing portion of corporate profits
vertical merger
(3) combination of firms involved in different steps of manufacturing or marketing
merger
(3) combination of two or more business enterprises to form a single firm
horizontal merger
(3) combination of two or more firms producing the same kind of product
public utilities
(3) company providing essential services such as water and electricity to consumers, usually subject to some government regulations
multinational
(3) corporation producing and selling without regard to national boundaries and whose business activities are located in several different countries
bankruptcy
(3) court-granted permission to an indivdual or business to cease or delay payment on some or all debts for a limited amount of time
nonprofit organization
(3) economic institution that operates like a business but does not seek financial gain; schools, churches, community service organizations
double taxation
(3) feature of taxation that allows stockholders' dividends to be taxed both as corporate profit and as personal income
conglomerate
(3) firm with four or more businesses making unrelated products, with no single business responsible for a majority of its sales
corporation
(3) form of a business organization recognized by law as a separate legal entity with all the rights and responsibilities of an individual, including the right to buy and sell property, enter into legal contracts, sue and be sued
limited partnership
(3) form of partnership where one or more partners are not active in the daily running of the business, and whose liability for the partnership's debt is restricted to the amount invested in the business
bond
(3) formal contract to repay borrowed money and interest on the borrowed money at regular future intervals
depreciation
(3) gradual wear on capital goods during production
net income
(3) measure of business profits determined by subtracting all expenses, including taxes, from revenues
cooperative
(3) nonprofit association performing some kind of economic activity for the benefit of its members
chamber of commerce
(3) nonprofit organization of local businesses whose purpose is to promote their interestes
professional association
(3) nonprofit organization of professional or specialized workers seeking to improve working conditions, skill levels, and public perceptions of its profession
labor union
(3) organization that works for its members' interests concerning pay, working hours, health coverage, fringe benefits, other job related matters
interest
(3) payment made for the use of borrowed money; usually paid at periodic intervals for long-term bonds or loans
stockholder
(3) person who buys or sells securities for investors
collective bargaining
(3) process of negotiation between union and management representatives over pay, benefits, and job-related matters
income statement
(3) report showing a business's sales, expenses, and profits for a certain period, usually three months or a year
unlimited liability
(3) requirement that an owner is personally and fully responsible for all losses and debts of a business; applies to proprietorship, general partnerships
limited life
(3) situation in which a firm legally ceases to exist when an owner dies, quits, or a new owner is added; applies to sole proprietorships and partnerships
inventory
(3) stock of goods held in reserve; includes finished goods waiting to be sold and raw materials to be used in production
cash flow
(3) total amount of new funds the business generates from operations; broadest measure of profits for a firm, includes both net income and non-cash charges
partnership
(3) 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; same as general partnership
charter
(3) written government approval to establish a corporation; includes company name, address, purpose of business, number of shares of stock, and other features of the business
credit union
(3, 11) nonprofit service cooperative that accepts deposits, makes loans, and provides other financial services
microeconomics
(4) branch of economic theory that deals with behavior and decision making by small units such as individuals and firms
demand
(4) combination of desire, ability, and willingness to buy a product
substitutes
(4) competing products that can be used in place of one another; products related in such a way that an increase in the price of one increases the demand for the other
change in demand
(4) consumers demand different amounts at every price, causing the demand curve to shift to the left or the right
diminishing marginal utility
(4) decreasing satisfaction or usefulness as additional units of a product are acquired
market demand curve
(4) demand curve that shows the quantity demanded by everyone who is interested in purchasing a product
demand curve
(4) graph showing the quantity demanded at each and ever possible price that might prevail in the market at a given time
demand schedule
(4) listing showing the quantity demanded at all possible prices that might prevail in the market at a given time
demand elasticity
(4) measure of responsiveness relating change in quantity demanded (dependable variable) to a change in price (independent variable)
change in quantity demanded
(4) movement along the demand curve showing that a different quantity is purchased in response to a change in price
complements
(4) products that increase the value of other products; products related in such a way that an increase in the price of one reduces the demand for both
law of demand
(4) rule stating that more will be demanded at lower prices and less at higher prices; inverse relationship between price and quantity demanded
marginal utility
(4) satisfaction or usefulness obtained from acquiring one more unit of a product
income effect
(4) that portion of a change in quantity demanded caused by a change in a consumer's real income when the price of a product changes
substitution effect
(4) that portion of a change in quantity demanded due to a change in the relative price of the product
elastic
(4) type of elasticity where the percentage change in the independent variable (usually price) causes a more than proportionate change in the dependent variable (usually quantity demanded or supplied)