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Economics Concepts Definitions

Concept
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Definition
Opportunity Cost The next best alternative that must be given up when a choice is made. Not all alternatives, just the next best choice.
Goods/Services Objects (goods) or services (activities) that can satisfy people's wants.
Resources-Natural/Human/Capital Anything used to produce goods and services; all natural, human and human-made aids to the production of goods and services, also called productive resources.
Barter/Trade The direct trading (barter) or any exchange (trade) of goods and services between people without the use of money.
Interdependence People depend on each other to provide goods and services; occurs as a result of specialization of production.
Specialization Production can often be best done by several or many people where each person specializes: does only a part of the job--the part that the person is skilled to do.
Specialization Production can often be best done by several or many people where each person specializes: does only a part of the job--the part that the person is skilled to do.
Specialization Production can often be best done by several or many people where each person specializes: does only a part of the job--the part that the person is skilled to do.
Money/Medium of Exchange A medium of exchange, which is a good (like shells or metal coins or pieces of paper) that can be used to buy other goods and services.
Saving Not spending all of one's income; the part of income not used for consumption.
Spending Purchase of currently produced goods or services; using income to buy for consumption.
Producers/Production People who use resources to make goods and services, also called workers./ The making of goods and services using resources.
Producers/Production People who use resources to make goods and services, also called workers./ The making of goods and services using resources.
Consumers/Consumption People whose wants are satisfied by using goods and services/using goods and services.
Consumers/Consumption People whose wants are satisfied by using goods and services/using goods and services.
Markets Any setting where buyers and sellers exchange goods, services, resources, and currencies.
Markets Any setting where buyers and sellers exchange goods, services, resources, and currencies.
Prices The value of a good or service stated in money terms.
Trade-offs Giving up one thing or activity to get some of another.
Demand A schedule of how much consumers are willing and able to buy at each possible price during some time period
Supply A schedule of how much producers are willing and able to produce and sell at each possible price during some time period.
Competition Rivalry among sellers to sell (supply) goods and services, or among buyers to buy (acquire) a service or good.
Equilibrium Price The market clearing price at which the quantity demanded by buyers equals the quantity supplied by sellers.
Entrepreneurs The human resource (person) who assumes the risk of organizing the other productive resources to produce goods and services.
Entrepreneurs The human resource (person) who assumes the risk of organizing the other productive resources to produce goods and services.
Profit The difference between the total revenue and total cost of producintg and selling a good or service in a business; entrepreneurial income.
Circular Flow A model of an economy showing the interactions between households and business firms as they exchange goods and services and resources in markets.
Public Goods Goods and services that are provided by the government. They are often goods that individuals don't buy enough of, but provide everyone benefits if widely consumed, such as education or national defense.
Public Goods Goods and services that are provided by the government. They are often goods that individuals don't buy enough of, but provide everyone benefits if widely consumed, such as education or national defense.
Role of Government The economic actions and results of government activities.
Taxes Required payments of money made to governments by households and business firms.
Taxes Required payments of money made to governments by households and business firms.
Taxes Required payments of money made to governments by households and business firms.
Credit The purchase of something using a promise to pay in the future.
Exchange Rate The price of the currency of one country in terms of another currency, e.g dollars per euro.
Productivity The ratio of output (goods and/or services) to input, or the amount of output produced per unit of productive resources over a period of time.
Productivity The ratio of output (goods and/or services) to input, or the amount of output produced per unit of productive resources over a period of time.
Economic Goals The objectives that economies pursue, such as full employment, stability, economic growth, and efficiency.
Market Failures Situations in which the outcome of the market is not efficient from society's point of view, e.g., the market participants might have no market incentives to avoid polluting the environment.
Economic Indicators Measures constructed to show where the overall economy has been, is now, or is going.
Economic Indicators Measures constructed to show where the overall economy has been, is now, or is going.
Inflation A persistent rise in overall prices.
Monetary Policy Policy done by a central bank to support the economy, relating to the supply of money, credit, and interest rates.
Fiscal Policy Policy done by a central spending authority of the government to support the economy, relating to spending and taxes.
Economic Institution Customs, behaviors, or organizations that are commonly found in an economy. Often used to refer to specific agencies or organizations that have a particular economic objective.
Economic Institution Customs, behaviors, or organizations that are commonly found in an economy. Often used to refer to specific agencies or organizations that have a particular economic objective.
Federal Reserve The central bank of the United States that makes policy for the money supply, credit, and interest rates.
Income Distribution The way national income is divided among households in the economy.
Comparative Advantage Describes a basis for specialization and trade between people or countries based on differences in their resources distribution.
Productivity The amount of goods or services that are produced per worker (or sometimes, per other input), or output per person.
Economic Systems Way in which a society decides and organizes production, distribution and consumption of goods and services of an economy, usually described as traditional, market, command, and mixed economies.
Economic Systems Way in which a society decides and organizes production, distribution and consumption of goods and services of an economy, usually described as traditional, market, command, and mixed economies.
Economic Systems Way in which a society decides and organizes production, distribution and consumption of goods and services of an economy, usually described as traditional, market, command, and mixed economies.
Factors of Production The resources used to produce goods and services, which are labor, capital (machines and buildings), and land.
Incentives Things that motivate and influence the behavior of households and businesses. Prices, profits, and losses act as incentives for participants to take action in a market economy.
Unemployment The situation in which people are willing and able to work at current wages but cannot find jobs.
Income The amount of money (wages, salaries, profits) received in a specified period in exchange for providing labor or selling goods and services.
Banks A commercial bank is a particular type of financial institution that can accept deposits, provide checking to the public, and make loans.
Human Capital The skills, talents, education, and experiences that a person embodies that are useful as a labor resource.
Financial Institutions An institution (e.g. commercial bank, savings and loan, investment bank) that collects funds ( from the public or other institutions) and invests them in financial assets.
Private Property Land and other belongings legally owned by a person or group which can be kept for their exclusive use.
International Trade Trading, buying and selling, between and among countries.
Markets Any setting where buyers and sellers exchange goods, services, resources, and currencies.
Profit The difference between the total revenue and total cost of producintg and selling a good or service in a business; entrepreneurial income.
Demand A schedule of how much consumers are willing and able to buy at each possible price during some time period
Supply A schedule of how much producers are willing and able to produce and sell at each possible price during some time period.
Equilibrium Price The market clearing price at which the quantity demanded by buyers equals the quantity supplied by sellers.
Private Property/Property Rights Land and other belongings legally owned by a person or group which can be kept for their exclusive use.
Decision-making Making an economic decision by comparing the costs and benefits of all of the alternatives.
Cost-Benefit Analysis Analysis of the comparison of the cost of an action with the benefits of that action.
Human Capital The skills, talents, education, and experiences that a person embodies that are useful as a labor resource.
Budgeting A list of estimated expenditures for a given period along with ways to pay for them.
Savings Not spending all of one's income; the part of income not used for consumption.
Interest The amount charged by a lender to a borrower for the use of money for a specified time.
Risk Management The identification, assessment, and prioritization of risks of financial assets in a portfolio.
International Trade Trading, buying and selling, between and among countries.
Benefits of Trade The net benefits to entities such as countries from open voluntary trading with each other.
Barriers to Trade Barriers countries set up for international trade, usually on imports, such as tariffs, excise taxes, and quotas.
Economic Institutions Customs, behaviors, or organizations that are commonly found in an economy. Often used to refer to specific agencies or organizations that have a particular economic objective.
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