1. Economics

• Key Concepts & Vocabulary 1

2. SCARCITY

The fundamental economic problem unlimited collective human wants/needs, limited resources.Therefore, we must make choices and prioritize what to produce/distribute/consume.

3. Opportunity Cost

The next best thing

that you would have

done with your

resource if you

hadnt done what

you did with your

resource.

4. PROFIT

Revenue - costs = profit. Whats left over after youve paid all your costs.

5. WEALTH

Accumulated of profit usually.

or accumulated resources of

other types.

6. FACTORS OF PRODUCTION

Land, labor, and capital.

7. LAND

Parts of the physical non-human universe used for production (soil, sun, oil, etc.)

8. LABOR

Human work used to transform a part of the non-human universe into a product that can be bought or sold.

9. CAPITAL

The means of production needed to make the production and selling possible including the wages to hire the laborer (financial capital), the tools for the laborer to use, the road to transport the product (fixed capital).Capital is wealth invested to make more profit.

10. COMMODITY

Anything that can be bought or sold.Especially something that is interchangeable with no qualitative differences (e.g. #2 corn).

11. MARKET

Any situation in which buyers and sellers can do what they do.

12. FREE MARKET

Usually used to describe a market without government intervention.May sometimes be used to describe a market undominated by any concentration of power.

13. CAPITALISM(1)

An economic system based on the private ownership of wealth and the profit motive and market mechanisms of labor, production, consumption, etc.

14. Capitalism (2)

A system of tremendous productivity based on the transformation of human beings into rented machines who labor for the profit of the wealthy.

15. PERFECT/PURE COMPETITION An ideal situation in which infinite numbers of buyers compete for infinite numbers of sellers, with perfectly interchangeable products, and perfectly shared information, no barriers to entry, etc.In other words, no participants in the market can ALTER the market. 16. PROFIT-MOTIVE

Capitalists make & improve businesses based on desire for wealth.

17. INVISIBLE HAND HAND

Used by Adam Smith to describe the magical dynamic of markets springing into existence, laborers seeking jobs, successful firms hiring laborers, buying and selling all as if organized by some power, but actually coordinated by peoples own self-interest.

18. ECONOMICS

Key Economics Vocabulary & Concepts 2

19. CETERIS PARIBUS

All else remaining equal.Everything, but the variables being discussed, held constant.

20. RATIONALMAXIMIZER MAXIMIZER

The classical economics view of humans is as rational actors who calculate and act based on their own (narrowly viewed) self-interest.

21. COMPARATIVE ADVANTAGE

Holding costs of production constant, the ability of one participant in a market to produce more than another.

22. UTILITY

Satisfaction of desires.

The benefit or pleasure gained from an action.

23. MARGINAL

The additional increment.The extra or next or previous increment.

24. ELASTICITY

A measurement of how the price of a commodity affects demand or supply.

25. RESOURCE SUBSTITUTION SUBSTITUTION

The tendency of market actors to prefer a roughly equivalent factor for more expensive ones.

26. MONEY

Anything which can be generally traded for other goods and services.Most modern economies use fiat currency (in which the money has no intrinsic value).

27. EXTERNALITY

The effect on others of economic actions.

28. REGULATION

Efforts by governments to restrict the economic activity of market participants to minimize negative externalities or maximize positive ones.

29. LABOR UNION

An organization of workers banded together to improve their situation, particularly against the capitalist boss(es) that profit from the workers labor.

30. MINIMUM WAGE

The creation of a standard wage below which firms arent allowed to hire workers.

31. SOCIALGOOD GOOD

A positive situation that benefits society as a whole.