Notes

opportunity cost- cost of the next best alternative use of money, time, or resources when one choice is made rather than another.

scarcity- problem in economics where people think resources are unlimited but later learn that resources are limited or can be over used.

micro economics- the study of how households and firms make decisions and how they interact in markets.

macro economics- branch of economics that deals with human behavior and choices as they relate to the entire economy.

trade off- a choice that involves giving up one thing in order to have more of another thing.

land- territory over which rule or control is exercised.

labor- productive work (especially physical work done for wages).

technology- the practical application of science to commerce or industry.

entrepreneurship- the process of getting into and operating one's own business.

economy- system by which goods and services are produced and distributed to meet people's needs.

economic models- simplified representations of the real world that are used to explain how the economy works.

economic system- system that sets rules for how people decide what goods and services to produce and how they are exchanged.

traditional economy- economic system that relies on habit, custom, or ritual to decide questions of production and consumption of goods and services.

command economy- an economic system in which the central government makes all economic decisions.

market economy- economy in which individuals control production and allocation decisions through supply and demand.

mixed economy- an economic system where there is free enterprise with government control and aspects of market and command economies.

demand- the desire, ability, and willingness of a consumer to buy a product.

supply- the amount of goods and services that producers are able and willing to sell at various prices during a specific time period.

market- the process of freely exchanging goods and services between buyers and sellers.

law of demand- the idea that people usually will buy less of a product if the price is high and more of it if the price is low.

quantity demanded- the actual amount of a good or service consumers are willing to buy at some specific price.

marginal utility- an additional amount of satisfaction from the use of an extra portion of a utility.

law of diminishing marg. utility- As the quantity of a good consumed increases the extra satisfaction gained decreases.

surplus- an amount of a product that is more than what is required,needed,or expected.

equilibrium- a situation in which the market price has balanced between the level at which quantity supplied equals quantity demanded.

elastic demand- situation in which a rise or fall in price greatly affects the quantity of a good that people are willing and able to buy

inelastic demand- The type of demand that exists when the percentage change in quantity demanded is less than the percentage change in price.

private property- property owned by individuals or companies, not by the government or the people as a whole