Economic Fundamentals
Something essential for survival, such as food or medicine.
What is a need?
The amount of money a business receives in excess of its expenses.
What is profit?
This type of demand occurs when consumers buy less of a good when the price for it rises.
What is elastic demand?
A product that is considered the same regardless of who makes or sells it.
What is a commodity?
Without prices or money as a medium of exchange, buyers and sellers would have to trade one type of good or service for another using this system.
What is barter?
This occurs when consumers want more of a good or service than producers are willing to make available at a particular price.
What is a shortage?
The process of bringing new methods, products. or ideas into use.
What is innovation?
The type of demand when consumers continue to buy a good even after its price rises.
What is inelastic demand?
This is when there is a single supplier of a good or service in a market.
What is a monopoly?
An economic side effect of a good or service that generates benefits or costs to someone other than the person deciding how much to produce or consume.
What is an externality?
Terms used by economists and politicians to describe the choice to spend money on military or domestic needs.
What is "guns or butter"?
An organization that uses resources to produce a good or service, which it then sells.
What is a firm?
Producers offer more of a good or service as its price increases and less as its price falls.
What is the law of supply?
This is granted by the government to an inventor and allows him/her exclusive rights to sell the invention for a specific period of time.
What is a patent?
Any arrangement that allows buyers and sellers to exchange things.
What is a market?
The use of resources in such a way as to maximize the output of goods and services.
What is efficiency?
The government, rather than individuals, answers the three basic economic questions.
What is a centrally planned economy? (socialism, communism)
The demand for all goods and services (demanded by all consumers) supplied in the country in a year.
What is aggregate demand?
Dividing consumers into two or more groups and charging each a different price.
What is price discrimination?
When a country produces a good so efficiently that other countries, which could make the same good, instead trade with that country to obtain the good.
What is comparative advantage?
The most desirable alternative somebody gives up as a result of a decision.
What is the opportunity cost?
The doctrine that government generally should not intervene in the marketplace.
What is laissez-faire?
This occurs when quantity supplied is not equal to quantity demanded in a market.
What is disequilibrium?
A certificate of ownership in a publicly traded corporation.
What is stock?
The government affecting the economy through its constitutional power to tax and spend.
What is fiscal policy?