EC-070 (Economic Basics)
What is scarcity?
The gap between unlimited wants and limited resources.
What are unsought products?
These products are bought out of necessity or adversity, like a coffin or crutches.
What is a command (or planned) economy?
An economic system where the government makes all the "what," "how," and "for whom" decisions.
What is profit?
The primary incentive or "drive" for taking the risk to start a business.
What is consumption?
The process of using goods and services to satisfy wants and needs.
What is opportunity cost?
The next best alternative given up when making a choice.
What is market price?
The actual price that prevails in a market at any particular moment.
What is a traditional economy?
This type of economy relies on customs and rituals to decide what to produce and eat.
What is a sole proprietorship?
A business owned and operated by one person.
What is production?
The economic activity of creating or manufacturing goods and services.
Who is an entrepreneur?
A person who takes a risk to start a business in search of profit.
What is the substitution effect?
This effect happens when a price increase causes consumers to buy a different, cheaper product instead.
Who is Adam Smith?
The "father of economics" who wrote The Wealth of Nations and described the "invisible hand."
What is a corporation?
A legal entity that is owned by stockholders and has the rights of an individual.
What is distribution?
The process of moving goods and services from the producer to the consumer.
What is human resources (or labor)?
The physical and mental effort people contribute to the production of goods and services.
What is equilibrium (or market-clearing) price?
The price point where the quantity demanded by buyers exactly equals the quantity supplied by sellers.
What is a mixed economy?
The economic system used by the United States, combining private enterprise and government regulation.
What is a monopoly?
This occurs when a company has exclusive control over a product or the means of producing it.
What is exchange?
This activity involves the trade of one thing for another, usually using money.
What is place utility?
The utility created by having a product where it is needed or wanted.
What is equipment?
Industrial goods that are used in business operations but are not part of the actual production, like a forklift.
What is competition?
This term describes the struggle between businesses for the consumer's dollar.
Who is a shareholder?
A person who owns at least one share of a company's stock.
Who are ultimate consumers?
These are individuals who use goods and services; they are the "end-users."