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scarcity
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not enough resources to for all of the things we would like to have
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wants
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thing we would like to have EX: vacation, new car
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needs
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requirement for survival EX: food, clothing, shelter
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economics
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the study of how individuals and nations make choices
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microeconomics
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studying the economic decision making by individuals and small businesses
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macroeconomics
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studying the economic economic decision making by government or large industries
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4 factors of production
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capital, land, labor, entrepreneurship
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land
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the natural environment used in productions: oil, water, soil, etc
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labor
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human effort towards producing goods and services
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capital
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tools, man-made goods used to make other goods and services
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entrepeneur
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individual who starts a new business, introduces a new product, and improves management technique
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consumer
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who buys a good or service
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consumer goods
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goods bought by a consumer
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producers
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who makes, grows, or supplies goods for sale.
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opportunity cost
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the cost of the next best alternative when choosing to do one thing rather than another. ("what you lost")
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trade off
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the exchange of one thing for another - the process of making decisions
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division of labor
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breaking down a job into smaller tasks to be more efficient
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specialization
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when people, businesses, regions, and/or nations concentrate what they can produce best
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law of diminishing returns
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when the continued adding input does not increase the productivity ("too many cooks in the kitchen")
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profit motive
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the driving force that encourages individuals and organizations to improve their material well being
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law of supply
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suppliers will produce more at higher prices and less at lower prices
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law of demand
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people will buy less of product if the price is high and more of it if the price is low
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equilibrium
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the price at which the amount producers are willing to supply is equal to the amount consumers are willing to buy = market clearing price
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complementary goods
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products often used with another good (EX: spaghetti and sauce) so the changes of supply and demand in one, affect the other
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substitute goods
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competing product that consumers can use in place of another (EX: Coke or Pepsi) so the changes of supply and demand in one, affect the other
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surplus
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situation in which quantity supplied is greater than quantity demanded
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shortage
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situation in which quantity demanded is greater than quantity supplied
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monopoly
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when the market has only a sole provider for a good or service
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oligopoly
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market dominated by a small number of sellers (EX: cereal, gas)
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sole proprietorship
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1 owner = business that legally has no separate existence from its owner. Income and losses are the individual's.
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partnership
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2 or more owner = business owners are legally responsible for all profits and losses
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corporation
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type of business organization owned by people but treated by law as though it were a person
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franchise
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agreement that gives an individual the right to market the original company's products or services
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limited liability
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is where a person's financial responsibility is fixed to the amount of money they put in - a protection that comes with corporation ownership
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unlimited liability
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refers to the legal obligations general partners and sole proprietors have because they are responsibile for all business debts
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Entreprenuership
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the skill to manage the other 3 factors of production
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