Econ Vocab 1 2 ppt

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
hadn’t done what
you did with your
resource.

4. PROFIT
Revenue - costs =
profit. What’s left
over after you’ve
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. MAXIMIZER
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 aren’t
allowed to hire
workers.

31. GOOD
GOOD
A positive
situation that
benefits society as
a whole.