ECONOMICS Final-vocabulary review

UNIT 1 Basic Economic Concepts

The economic system where there is private ownership, consumer sovereignty, and minimal government involvement Free-market economy

Things that excite or motivate people to change their economic behavior Incentives

What is given up in order to get something Opportunity cost

The most common type of economic system— combining free-market and command economies Mixed-market economy

Things that can be grown or manufactured, then bought or sold Goods

The using (up) of goods and services Consumption

A limited supply of resources in comparison to unlimited wants and needs—it forces trade- offs Scarcity

Selecting an item or action from a set of alternatives Choice

The degree of availability of an item or service— how much there is available to consume Supply

Things required for survival—food, water, shelter, etc. Needs

Provided by nature, such as raw materials, land, or air Natural resources

Rivalry between producers or sellers, resulting in a better quality good/service and/or lower price Competition

Effort or work of producers; labor Human resources

Things consumers would like to have such as cars, TV’s, and jewelry Wants

The three basic questions any society/economy must ask— 1. What will be produced (and how much)? Who will produce it? For whom will it be produced?

UNIT II The Market Economy

The quantity of a good or service that consumers are willing and able to buy at various prices Demand

The quantity of a good or service that producers are willing and able to offer for sale at various prices Supply

An economic law stating that as prices of a good or service increases, the quantity demanded decreases ( and vice versa). Law of Demand

An economic law stating that as prices of a good or service increases, the quantity supplied increases ( and vice versa). Law of Supply

A product that satisfies the same basic want as another product—Coke or Pepsi. Substitute good

A product that is used or consumed jointly with another product—PB & J. Complimentary good

The measure of the degree of change in quantity demanded or supplied in response to change in price. Elasticity

A minimum price set by the government to prevent prices from going too low. Price floor

A maximum price set by the government to prevent prices from going too high. Price ceiling

What is given up by adding one more unit to an activity. Marginal cost

What is gained by adding one more unit to an activity. Marginal benefit