Economic Terms

There are some basic economic terms that we need to be aware of before we can learn about the economy.

Wants Things we desire to have

Goods Physical products

Services Products you can’t touch

Scarcity The result of an inability to satisfy all of everyone’s wants EVERYTHING IS SCARCE

Choices We can’t have everything we want Therefore, we must choose what we get

Opportunity Costs The best alternative given up when making a decision

Rationing Device A means for deciding who gets what portion of the available goods and services

Economics Studies the choices of people trying to satisfy their wants in a world of scarcity

Exchanging Giving one thing for another (e.g. $ for food)

Market Whenever and wherever people voluntarily make exchanges with one another

Economic Concepts

These concepts are the basis for our study of the economy

Trade-offs Giving up some of one thing in order to get more of another

Unintended Effects Taking action to solve one problem results in something unrelated to occur. Example: raising the price on a pair of shoes to earn more money and ending up selling fewer shoes and actually losing money

Global Economy Economic actions taken anywhere in the world may affect an individual’s standard of living

Microeconomics Studies the individual or a single business in the economy

Macroeconomics Studies the economy as a whole

Factors of Production Natural resources Human resources Capital Entrepeneurship

Economic Questions What goods will be produced? How will the goods be produced? For whom will the goods be produced?