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the study of how people seek to satisfy their needs and wants by making choices


the branch of economics that studies the economy of consumers or households or individual firms


the branch of economics that studies the overall working of a national economy


limited quantities of resources to meet unlimited wants


pleasure, happiness, or satisfaction

marginal analysis

analysis that involves comparing marginal benefits and marginal costs

economic goals

economic growth, full employment, economic efficiency, price level stability, economic fredom, an equitable distribution of income, economic security, balance of trade


mutually exclusive goals demand that, to achieve one, we must sacrifice another


a collection of specific economic units treated as if they were one unit

factors of production

land, labor, and capital

full employment

the economic condition when everyone who wishes to work at the going wage-rate for their type of labor is employed

opportunity cost

The highest valued alternative foregone in the pursuit of an activity

economic growth

steady growth in the productive capacity of the economy (and so a growth of national income)

traditional economy

economic system that relies on habit, custom, or ritual to decide questions of production and consumption of goods and services

command economy

An economic system in which the government controls a country's economy.

market economy

an economy that relies chiefly on market forces to allocate goods and resources and to determine prices

resource market

A market in which a resource is bought and sold

product market

the market in which households purchase the goods and services that firms produce


the world of commercial activity where goods and services are bought and sold


the ability and desire to purchase goods and services

law of demand

consumers buy more of a good when its price decreases and less when its price increases

deminishing marginal utility

the principal establishing that price alone does not determine demand.

income effect

the change in consumption resulting from a change in real income

substitution effect

when consumers react to an increase in a good's price by consuming less of that good and more of other goods

demand schedule

a table that shows the relationship between the price of a good and the quantity demanded

demand curve

a graphic representation of a demand schedule

change in the quantity demanded

a movement along the demand curve that occurs in response to a change in price

determinants of demand

consumer tastes, the number of buyers in the market, the money incomes of consumers, the prices of related goods, and price expectations


two goods for which an increase in the price of one leads to an increase in the demand for the other


Two goods that are bought and used together

unrelated goods

Goods that don't effect each other


offering goods and services for sale

law of supply

Tendency of suppliers to offer more of a good at a higher price

supply schedule

a table that shows the relationship between the price of a good and the quantity supplied

supply curve

a graph of the relationship between the price of a good and the quantity supplied

change in the quantity supplied

a movement along the supply curve that occurs in response to a change in price

change in supply

resource prices, production techniques, taxes or subsidies, the prices of other goods, price expectations, or the number of sellers in the market


the property of being an amount by which something is less than expected or required


a quantity much larger than is needed


a state of equality

equilibrium price

the price that balances quantity supplied and quantity demanded

equilibrium quantity

the quantity supplied and the quantity demanded at the equilibrium price

price ceiling

a maximum price that can be legally charged for a good or service

price floor

floor below which prices are not allowed to fall

private property

property owned by individuals or companies, not by the government or the people as a whole

economic freedom

The freedom to own property, to make a profit, and to make choices about what to produce, buy, and sell


concern for ones own well being and advantages


the act of competing as for profit or a prize


the practical application of science to commerce or industry

role of government

laws set in regulating economic activities and improving economic conditions

declining industries

Growth becomes negative for a variety of reasons, including technological substitution. Within a declining industry, the degree of rivalry among established companies usually increases. The greater the exit barriers, the harder it is for companies to reduce capacity and the greater is the threat of severe price competition. (falling demand = excess capacity, growth becomes negative)

consumer soverignty

role of consumer as ruler of market when deternmining the types of goods and services produced

invisible hand

term economists use to describe the self-regulating nature of the marketplace


services and products provided for consumers


Activities that are consumed at the same time they are produced


tangible products that we use to satisfy our wants and needs


a fund of money put by as a reserve

durable goods

a consumer good with an expected life (use) of 3 or more years

nondurable goods

goods such as clothing and food.


buildings for carrying on industrial labor


members of a business organization that owns or operates one or more establishments


the organized action of making of goods and services for sale

sole partnership

a business enterprise owned by one individual


an organization that is authorizrd by law to carry on an activity but treated as though it were a single person


shares of ownership in a company


certificates that represent money the government has borrowed from private citizens

limited liability

the liability of a firm's owners for no more than the capital they have invested in the firm


a market in which there are many buyers but only one seller


charge against a citizen's person or property or activity for the support of government

transfer payments

payments by the government to individuals for which the government does not receive a new good or service in return


any indirect effect of public expenditure

government revenue

income available to the government


a contract between two or more persons who agree to pool talent and money and share profits or losses

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