Scarcity and choice

Economic goods: Any good or service that is scarce in relation to demand for them.

Free goods: “gifts of nature” that are useful but are not scarce and have no value to people.

Goods: all tangible items of value that can be touched or felt.

Income: money of all kinds received by a person or organization in a year from work, investment, rent, etc.

Need: what someone needs to have in order to live a full healthy comfortable life.

Opportunity cost(s): benefit, profit, or value of something that must be given up to obtain or achieve something else.

Profit: money that an entrepreneur gains by selling something, or from doing business in a particular period of time after the production costs have been met.

Resources: something that a country, person, or organization has and can use to achieve its/their goals.

Savings: the sums of money saved, not spent but put aside for future use.

Scarcity: a situation in which there is not enough of something to go around.

Services: intangible items of value in the form of labor, advice, managerial skills, etc.

Trade-off: giving up one benefit, advantage, etc. in order to receive another that is more desirable.

Wants: a specific feeling of needing something that is absent or unavailable.

Wealth: a large amount of money, property etc that a person or nation owns.

Branches of economics

Economist: an expert in economics.

Economic model: any simplified statement, diagram or formula used to understand economic events

Economics: the study of a man in his attempts to make a living by using his scarce resources.

Macroeconomics: the branch of economics that studies behaviour and overall productive efficiency of the economy as a whole.

Microeconomics: the study of the individual parts of the economy, with special attention to the market price and how it works.

Normative economics: an econo-mic analysis that includes value judgments about what ought to be done, rather than simply developing a theory.

Positive economics: an economic analysis that is purely based on facts rather than opinions and studies why the economy operates as it does.

Factors of production

Capital: something created to produce other goods and services; also money used to pay for the operation of a business.

Entrepreneur: a person who creates a business in the hope of earning a profit; also a person, who organizes, manages and assumes the risk of a business enterprise.

Entrepreneurship: the mana-gerial or organizational skills needed by most firms to produce goods and services at a profit.

Factors of production: the productive resources of land, labour, capital and entrepreneurship that go into the production process.

Information: facts or details that tell something about the person, situation, event etc.

Interest: payment for using someone else’s money; income derived from allowing someone else to use one’s money.

Labour: the human efforts required to produce goods and services.

Land: the gift of nature in the form of useful materials in or on the earth, including surface space, soil, rocks, minerals, water, wind and weather.

Means of production: the material, tools, and equipment that are used in the production of goods.

Rent: return paid to those who supply the factor of production known as land.

Wages: the price paid for the use of labour. (To the economist, the term refers to the nation’s wealth paid to labour, as distinct from other forms of income – rent, interest, and profit).

THE BASIC ECONOMIC PROBLEM

TYPES OF ECONOMIC SYSTEMS

Command economy: an economic system in which major decisions concerning the resources allocation are made by agencies of the government.

Economic system: the approach a country uses to deal with the scarcity and achieve its economic goals.

Free enterprise system: an economic system based on the private ownership of property, competition, and the profit motive.

Market economy: an economic system in which national economic decisions are the result of decisions of individual buyers and sellers in the market place.

Mixed economy: an economic system that combines elements of public ownership of the means of production with private ownership.

Private property: the basic right of the free enterprise system that guarantees the individual’s right to own, use, and dispose of things of value.

Profit motive: the desire to benefit from the investment of time and money in a business enterprise.

Traditional economy: an economic system that allocates scarce resources according to custom; change and growth are very slow; people do what their parents did before them; most goods are produced and consumed locally.

DEMAND

Complementary goods: the two goods tend to be consumed or used together in relatively fixed or standardized proportions

Demand curve: the graphical representation of how demand for something varies in relation to its price.

Demand schedule: a table showing the quantities of a product that would be purchased at various prices at a given time.

Demand: the level of a consumer’s willingness, ability and desire or need that exist for particular goods or services

Elastic demand: Demand for which a small change in price results in a large change in demand.

Elasticity: An economic concept which is concerned with a shift in either demand for or supply of an economic product as the result of a change in a product’s price.

Inelastic demand: Demand for which a large change in price leads to only a small change in demand.

Law of demand: the economic law that states that demand for a product varies inversely with its price.

Substitute: a product or service that partly satisfies the need of a consumer that another product or service fulfills.

SUPPLY

Elastic supply: Supply for which a percentage change in a product's price causes a larger percentage change in the quantity supplied.

Elasticity of supply: The degree to which supply of a commodity responds to a change in that commodity’s price.

Inelastic supply: Supply for which a percentage change in a product's price causes a smaller percentage change in the quantity supplied.

Law of supply: the economic law that states as the price of a commodity that producers are willing and able to offer for sale during a particular period of time rises (falls), the quantity of the commodity supplied goes up (decreases), all non-price determinates being equal.

Quantity supplied: the amount of a product that producers are willing and able to sell at a certain price during a time period, all other factors that may determine supply remaining the same.

Supply: the total amount of a commodity available for purchase by consumers.

Supply curve: the graphical representation of how supply varies as prices change.

Supply schedule: a table showing the quantities of a product that would be offered for sale at various prices at a given time.

PRICE

Equilibrium: A condition of a market in which buyers’ and sellers’ plans exactly coincide, so that the quantity supplied exactly equals the quantity demanded at a current price.

Equilibrium price: the price at which the quantity of goods or services offered by suppliers is exactly equal to the quantity that is demanded by purchasers in a particular time period.

Excess demand (shortage): the amount of a product that could be sold at a price lower than the market price.

Excess supply (surplus): the amount of a product available at a price higher than the market price.

Market price: the price that prevails in a market and at which commodities are actually exchanged for money.

Price: the money value of goods and services

Price system: an economic system in which resources are allocated as a result of the interaction of the forces of supply and demand.

MARKET

Competition: The rivalry between suppliers in the same market, usually in selling at the lowest price or in giving better quality or generally offering better value for money.

Competitive market: One in which there is only one price for a given commodity at any one time; all buyers and sellers know the market conditions.