Economics Concepts Definitions
| Concept | Definition |
|---|---|
| Banks |
A commercial bank is a particular type of financial institution that can accept deposits, provide checking to the public, and make loans. |
| Barriers to Trade | Barriers countries set up for international trade, usually on imports, such as tariffs, excise taxes, and quotas. |
| Barter/Trade | The direct trading (barter) or any exchange (trade) of goods and services between people without the use of money. |
| Benefits to Trade | The net benefits to entities such as countries from open voluntary trading with each other. |
| Budgeting | A list of estimated expenditures for a given period along with ways to pay for them. |
| Capital Resources (capital goods) | Goods made by people and used to produce other goods and services (machines and factories). |
| Choice | Deciding between two or more possible alternative objects or actions; called an economic choice for decisions among goods, services, or resources. |
| Circular Flow | A model of an economy showing the interactions between households and business firms as they exchange goods and services and resources in markets. |
| Comparative Advantage | Describes a basis for specialization and trade between people or countries based on differences in their resources distribution. |
| Competition | Rivalry among sellers to sell (supply) goods and services, or among buyers to buy (acquire) a service or good. |
| Consumers/Consumption | People whose wants are satisfied by using goods and services/using goods and services. |
| Cost-Benefit Analysis | Analysis of the comparison of the cost of an action with the benefits of that action. |
| Cost of Production | The total paid for all resources used by a business in producing goods and services. The owners of the resources receive the payment. |
| Credit | The purchase of something using a promise to pay in the future. |
| Decision-making | Making an economic decision by comparing the costs and benefits of all of the alternatives. |
| Demand | A schedule of how much consumers are willing and able to buy at each possible price during some time period. |
| Division of Labor | The process whereby workers divide up a job, so each performs only a single task or very few steps of a major production task, as when working on an assembly line. |
| Economic Goals | The objectives that economies pursue, such as full employment, stability, economic growth, and efficiency. |
| Economic Indicators | Measures constructed to show where the overall economy has been, is now, or is going. |
| Economic Institutions | 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. |
| Economic Systems | Way in which a society decides and organizes production, distribution and consumption of goods and services of an economy, usually described as traditional, market, command, and mixed economies. |
| Entrepreneurs | The human resource (person) who assumes the risk of organizing the other productive resources to produce goods and services. |
| Equilibrium Price | The market clearing price at which the quantity demanded by buyers equals the quantity supplied by sellers. |
| Exchange Rate | The price of the currency of one country in terms of another currency, e.g dollars per euro. |
| Factors of Production | The resources used to produce goods and services, which are labor, capital (machines and buildings), and land. |
| Federal Reserve | The central bank of the United States that makes policy for the money supply, credit, and interest rates. |
| Financial Institutions | An institution (e.g. commercial bank, savings and loan, investment bank) that collects funds (from the public or other institutions) and invests them in financial assets. |
| Fiscal Policy | Policy done by a central spending authority of the government to support the economy, relating to spending and taxes. |
| Goods/Services | Objects (goods) or services (activities) that can satisfy people's wants. |
| Human Capital | The skills, talents, education, and experiences that a person embodies that are useful as a labor resource. |
| Human Resources (labor) | The quantity and quality of human effort directed toward producing goods and services (also called labor). |
| Incentives | Things that motivate and influence the behavior of households and businesses. Prices, profits, and losses act as incentives for participants to take action in a market economy. |
| Income | The amount of money (wages, salaries, profits) received in a specified period in exchange for providing labor or selling goods and services. |
| Income Distribution | The way national income is divided among households in the economy. |
| Income Tax | Taxes paid by households and business firms based on the amount of income they receive. |
| Inflation | A persistent rise in overall prices. |
| Interdependence | People depend on each other to provide goods and services; occurs as a result of specialization of production. |
| Interest | The amount charged by a lender to a borrower for the use of money for a specified time. |
| International Trade | Trading, buying and selling, between and among countries. |
| Investment in Capital Resources | Business purchases of new plants (buildings) and equipment. |
| Investment in Human Resources | Activities that increase the skills and knowledge of workers. |
| Market Economy | An economic system where most goods and services are exchanged through private transactions by private households and businesses. Prices are determined by buyers and sellers making exchanges in private markets. |
| Market Failures | Situations in 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. |
| Markets | Any setting where buyers and sellers exchange goods, services, resources, and currencies. |
| Monetary Policy | Policy done by a central bank to support the economy, relating to the supply of money, credit, and interest rates. |
| 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. |
| Natural Resources | Gifts of nature that can be used to create goods or services, and are present without human intervention. Land is the main natural resource. |
| Opportunity Cost | The next best alternative that must be given up when a choice is made. Not all alternatives, just the next best choice. |
| Prices | The value of a good or service stated in money terms. |
| Private Property/Property Rights | Land and other belongings legally owned by a person or group which can be kept for their exclusive use. |
| Producers/Production | People who use resources to make goods and services, also called workers./ The making of goods and services using resources. |
| Productivity | The amount of goods or services that are produced per worker (or sometimes, per other input), or output per person. |
| Productivity | The ratio of output (goods and/or services) to input, or the amount of output produced per unit of productive resources over a period of time |
| Profit | The difference between the total revenue and total cost of producing and selling a good or service in a business; entrepreneurial income. |
| Property Tax | Taxes paid by households and businesses based on the value of land and buildings. |
| Public Goods | Goods and services that are provided by the government. They are often goods that individuals don't buy enough of, but provide everyone benefits if widely consumed, such as education or national defense. |
| Resources: Natural/Human/Capital | Anything used to produce goods and services; all natural, human and human-made aids to the production of goods and services, also called productive resources. |
| Risk Management | The identification, assessment, and prioritization of risks of financial assets in a portfolio. |
| Role of Government | The economic actions and results of government activities. |
| Sales Tax | Taxes paid on the value of goods and services people buy. |
| Saving | Not spending all of one's income; the part of income not used for consumption. |
| Scarcity | Resources are limited, so people cannot have all the goods and services they want. |
| Shortage | The situation resulting when the quantity demanded exceeds the quantity supplied at the current price of a good, service, or resource. |
| Specialization | Production can often 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. |
| Spending | Purchase of currently produced goods or services; using income to buy for consumption. |
| Supply | A schedule of how much producers are willing and able to produce and sell at each possible price during some time period. |
| Surplus | The situation resulting when the quantity supplied exceeds the quantity demanded at the current price of a good, service, or resource. |
| Taxes | Required payments of money made to governments by households and business firms. |
| Trade/Exchange | Trading goods and services with people for other goods and services or for money. When people exchange voluntarily, they expect to be better off as a result. |
| Trade-offs | Giving up one thing or activity to get some of another. |
| Unemployment | The situation in which people are willing and able to work at current wages but cannot find jobs. |