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Economics concepts
The document defines key economic concepts including scarcity, opportunity cost, specialization, markets, supply and demand, monetary policy, fiscal policy, and economic growth. Resources are limited so people must make choices, and choosing one alternative means forgoing the next best option or opportunity cost. Specialization and trade allow people and countries to focus on specific production and gain from interdependence. Markets facilitate exchange through the interaction of supply and demand which determine prices. Governments influence the economy through monetary policy, fiscal policy, and other economic policies and institutions with goals of stability, employment, and growth.
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Economics concepts
- 1.
- 2. Scarcity • Resources arelimited, so people cannot have all the goods and services they want.
- 3. Choice • Deciding betweentwo or more possible alternative objects or actions; called an economic choice for decisions among goods, services, or resources.
- 4. Opportunity Cost • Thenext best alternative that must be given up when a choice is made. Not all alternatives, just the next best choice.
- 5. Barter/Trade • The directtrading (barter) or any exchange (trade) of goods and services between people without the use of money.
- 6. Interdependence • People dependon each other to provide goods and services; occurs as a result of specialization of production
- 7. Specialization • Production canoften be best done by several or many people where each person specializes: does only a part of the job--the part that the person is skilled to do.
- 8. Money/Medium of Exchange •A medium of exchange, which is a good (like shells or metal coins or pieces of paper) that can be used to buy other goods and services.
- 9. Saving • Not spendingall of one's income; the part of income not used for consumption.
- 10. Spending • Purchase ofcurrently produced goods or services; using income to buy for consumption.
- 11. Producers/Production • PRODUCERS: Peoplewho use resources to make goods and services, also called workers. • PRODUCTION: The making of goods and services using resources.
- 12. Consumers/Consumption • CONSUMERS: Peoplewhose wants are satisfied by using goods and services. • COMSUMPTION: using goods and services.
- 13. Factors of Production •Resources used by businesses to produce goods and services.
- 14. Resources-Human/Natural/Capital Anything used toproduce goods and services: • LAND • LABOR • CAPITAL • ENTREPRENEURSHIP
- 15. ECONOMIC RESOURCES ● Land– natural resources such as iron ore, gold, diamonds, oil, etc. ● Labor – human resources such as wage-earning workers ● Entrepreneurship – the marshaller of resources, the person or group that marshals resources in the production of final goods (Bill Gates, Steve Jobbs, Henry Ford, etc.) ● Capital – plants and equipment used in the production of final goods, such as assembly lines, trucks, heavy duty machinery, factories, etc.
- 16. Markets • Any settingwhere buyers and sellers exchange goods, services, resources, and currencies.
- 17. Prices • The valueof a good or service stated in money terms.
- 18. Demand • A scheduleof how much consumers are willing and able to buy a product or service at each possible price during some time period.
- 19. Supply • A scheduleof how much producers are willing and able to produce and sell a product or service at each possible price during some time period.
- 20. Competition • Rivalry amongsellers to sell (supply) goods and services, or among buyers to buy (acquire) a service or good.
- 21. Entrepreneurs • The humanresource (person) who assumes the risk of organizing the other productive resources to produce goods and services.
- 22. Profit • The differencebetween the total revenue and total cost of producintg and selling a good or service in a business; entrepreneurial income. PROFIT = REVENEU – TOTAL COST REVENUE = QUANTITY * PRICE TOTAL COST = FIX COST + VARIABLE COST
- 23. Economic Systems • Theway a society organizes the production, consumption, and distribution of goods and services.
- 24. Role of Government •The economic actions and results of government activities.
- 25. Taxes • Required paymentsof money made to governments by households and business firms. • EXAMPLES: VAT, PROFIT TAX....
- 26. Credit • The purchaseof something using a promise to pay in the future.
- 27. Unemployment • The situationin which people are willing and able to work at current wages but cannot find jobs. • Nowadays young people are the most unemployed due to the difficulty of finding a job.
- 28. Shortages and Surpluses •The situation resulting when the quantity demanded exceeds (shortage) or is less than (shortage) the quantity supplied at the current price of a good, service, or resource.
- 29. Incentives • Things thatmotivate and influence the behavior of households and businesses. • Prices, profits, and losses act as incentives for participants to take action in a market economy.
- 30. Productivity • The ratioof output (goods and/or services) to input, or the amount of output produced per unit of productive resources over a period of time.
- 31. Economic Goals • Theobjectives that economies pursue, such as full employment, stability, economic growth, and efficiency.
- 32. Market Failures • Situationsin which the outcome of the market is not efficient from society's point of view, e.g., the market participants might have no market incentives to avoid polluting the environment.
- 33. Economic Indicators • Measuresconstructed to show where the overall economy has been, is now, or is going. • Examples: rate of unemployment, GDP (gross domestic product), CPI (consumer price index)....
- 34. Inflation • A persistentrise in overall prices.
- 35. Monetary Policy • Policydone by a central bank to support the economy, relating to the supply of money, credit, and interest rates.
- 36. Fiscal Policy • Policydone by a central spending authority of the government to support the economy, relating to spending and taxes.
- 37. Economic Institution • Customs,behaviors, or organizations that are commonly found in an economy. • Often used to refer to specific agencies or organizations that have a particular economic objective.
- 38. ECB (european centralbank ) • It is not like the other banks or credit institutions. • The EUROPEAN CENTRAL BANK, it makes policy for the money supply, credit, and interest rates.
- 39. Income Distribution • Theway national income is divided among households in the economy. • Gini coefficient measures the inequality of the income distribution of a country
- 40. Economic Growth • Percentageincreases of some overall measure of the economy, such as GDP (GROSS DOMESTIC PRODUCT).