Michigan Council on Economic Education-Glossary Definitions

Terms and Definitions

Advertisement	a paid message that provides information and uses persuasion to encourage a purchase or promotes a point of view. Billboards, newspapers, magazines, radio and television all offer forms of advertising. There are three basic forms of advertising appeals: Rational Product features and price that allow comparison. Emphasis might be dependability, convenience, price, and savings associated with use. Emotional Emphasis on feelings versus fact. Common approaches are social acceptance, individuality, prestige, and creativity. Testimonial Statement on the benefits of a product with little useful product information, frequently made by an "expert" or celebrity.
Alternatives	a choice (or option) available when making a decision. A student’s after -school alternatives might include going to the park playing a video game and doing homework.
Arbitrator	a person who listens to both sides of a dispute then decides how it should be resolved. The people who are arguing must do what this person tells them to do.
Assets	the total value of everything owned by and owed to a business including buildings and equipment, accounts receivable, and other investments.
Bandwagon	a suggestion that everybody is using a good or service.
Bargain	to try to reach an agreement. Consumers negotiate price with auto dealers. Union members use collective bargaining to negotiate with a seller to get more pay and better working conditions. Also refers to purchases that are considered low in price.
Barter	to trade goods or services without money. Students barter when they trade lunch items and baseball cards.
Benefit	something that is positive or good. A benefit of playing in the park is spending time with friends.
Bond	a written promise of payment by a corporation or government at the end of a specific time period. Bondholders receive interest on the amount they have loaned. Capital gains and losses can also occur.
Boycott	to refuse to buy or use to achieve a goal. Consumers refuse to buy to influence business behavior, for example, they boycotted grapes to protest treatment of migrant workers.
Brand name	a name for a product used to make it appear different from similar products, for example, "Kraft" cheese, "Nike" shoes, "Guess" jeans and "GM" cars.
Budget	an estimate or plan of expected income, spending and savings used to achieve goals.
Business	an organization that produces goods or services.
Capital	money invested in a business
Capital investments	providng workers with education, training, machines, and other tools to increase output.
Capital resources	human-made goods, tools, machines and buildings used to produce other goods and services. The availability of these goods reflects the state of technology and resources invested in research. Tools and machines used in production may be referred to as capital equipment.
Cash assistance	support provided in the form of money. Aid to Families with Dependent Children, unemployment insurance and worker's compensation are examples of cash payments funded through taxes. Cash assistance can also be money saved through a progressive tax system and tax breaks.
Caveat Emptor	a Latin term meaning "let the buyer beware."
Check	a written order asking a bank to pay money from a person's bank account
Checking account	money in a bank that can be withdrawn by writing a check. Interest is paid on some of these accounts.
Choice	making a selection among alternatives.
Coin	a round flat piece of metal issued by a government which is used to buy goods and services
Command economy	except for human resources, most productive resources are owned and controlled by a central authority such as feudal lords or government planners. Those in power also decide what will be produced and how it will be distributed. Emphasis is placed on achieving social goals they establish. Cuba, North Korea and the former Soviet Union provide examples.
Comparison shop	to examine price, features and quality before buying a product or service.
Competition	when two or more sellers try to sell similar goods or services to a group of buyers.
Complain	to send a message there is a problem. A consumer might complain with a phone call or letter to the seller. If this does not work, a government agency or the courts may be asked to intervene.
Complementary good	an item used with another items such as ground beef and hamburger buns. An increase in the purchase of one positively influences the quantity of the other purchased.
Compound interest	money paid on money earned as interest in the past.
Conservation	effort made to preserve and protect resources.
Consumer	a person who buys or uses goods and services.
Consumer Price Index (CPI)	the increase in the price of a "basket" of goods and services commonly purchased by consumers that includes food, housing, clothing, transportation, medical care and entertainment. While wages and Social Security Benefits have been linked to the CPI, it is criticized for not reflecting the average household budget.
Consumption	buying and using goods and services.
Contract	legal agreement between two or more parties.
Copyright	a creator's right to sell or copy written materials and artistic works for the creator's lifetime plus fifty years. Books and photographs are among item copyrighted.
Corporation	a business owned by two or more people (stockholders) who risk only the money they invest. Their share in the company is reflected by the stocks they hold. A corporation operates separate from its owners and has rights and responsibilities just like a person. Owner risk is no more than what the stockholder has invested. Wal-Mart and Kellogg are corporations.
Cost	something that is negative or bad. A low grade and adult disapproval are costs of not doing homework.
Coupon	a piece of paper offering a reduced price. Coupons are frequently used to attract new buyers and to convince people to switch brands.
Credit	trust that something owed will be repaid.
Credit limit	the highest amount that can be borrowed.
Creditor	a person or institution that lends money.
Currency	money used in a given place. The Peso, Yen, and Dollar are currency in different countries.
Debt	something owed.
Debtor	a person who owes money.
Decision making	weighing costs and benefits of choices. A decision grid is a useful tool when considering options.
Deficit	when money paid out (expenses) is greater than income.
Demand	a schedule of how much buyers are willing and able to buy at different prices in a given time period. The amount people are willing to buy is also influenced by non -price determinants.
Depression	a reduction in GDP for a long period of time. Producers invest less and sell less, unemployment is high, consumers buy less and it is hard to get credit.
Discount	a reduced price. Discounts are used to quickly reduce supplies on -hand, attract new buyers and reward past buyers.
Discrimination	when one group is favored over another and it has nothing to do with ability or resources. Discrimination is based on elements like race and gender.
Display	to place a product where it will be seen. Placement at eye level on a shelf, at the end of a store aisle, in a window or by a checkout counter offer popular display methods used to market a product.
Distributor	person or business that supports the movement of goods between producers and consumers. Truck drivers, retailers, and wholesalers are examples.
Division of labor	workers perform only one or a few of the many steps in a production process. Division of labor like that used on an assembly line is a form of specialization.
Durable good	a product that lasts a long time, for example, bicycles, cars, and major home appliances
Economic growth	an increase in a nation's productivity. Growth offers more goods and services to a nation's people
Economic system	the framework a society uses to organize and facilitate the production, distribution and consumption of goods and services.
Economies of scale	increasing production of one kind of output creating a reduction in the cost per unit.
Employee	a worker who is paid for doing a job by another person or business (employer).
Entrepreneur	a person who takes a risk to start a business — organizing the resources needed to produce. Henry Ford was an entrepreneur who used his personal savings to design a factory which produced automobiles on an assembly line.
Equal opportunity programs	laws and other activities that try to reduce discrimination. Areas targeted include education, jobs, and housing.
Export	a good or service produced in one country and then sold to buyers in another.
Extractor	a business that grows products or removes raw materials from where they are found in nature. Farmers are extractors as are coal miners and companies that pump oil from the ground.
Fee	money collected in return for services provided by government. People pay a toll fee to use turnpikes. Businesses pay fees to get a license.
Financial institution	a business that provides a safe place to store money and serves as a middle agent between savers and borrowers. Banks, credit unions, investment companies, and small loan givers are examples.
Fixed cost	a cost of production that does not change when there is a change in the amount produced. A printing company press are common fixed costs for a printing business.
Fixed expenses	a set amount of money paid out on a regular basis. School lunches are a fixed expense.
Flexible expense	money paid for something that is not bought on a regular basis. Art supplies bought for a school project are a flexible expense. Also referred to as a variable expense.
Generic brand	a product without a brand name. Generic goods often cost less than brand name items because the seller did not spend money on advertising. There may be differences in quality. Corn flakes, catsup and orange juice are available as generics.
Goal	something people try to achieve. Short -term goals like learning to read and getting good grades help achieve long - term goals like going to college and getting a job.
Good	something that can be touched or held. Shoes, toys and cars are all goods.
Grade	the classification of a product such as beef and eggs.
Gross Domestic Product (GDP)	the value of final goods and services produced in a country during a specific period of time. GDP includes automobiles because they are ready for use but not the intermediate products such as steel used to manufacturer the car which would count the steel twice. A rising GDP points to a strong, expanding economy while a falling GDP is connected with higher unemployment and a weak economy.
Human resources	the people (labor) used to produce goods and services including their health, physical strength, motivation, knowledge and skills. The quality of human capital, also referred to as human capital, can be improved through investments in education, training and health care.
Import	a goods or service bought from sellers in other countries.
Impulse buying	to spend money quickly without considering the alternatives. Candy bars are placed near checkout counters to encourage impulse buying.
Income	money received. Salaries and wages are examples of earned income while gifts, government benefit checks, interest and rent are referred to as unearned income.
Income tax	a tax on money received. Income taxes are used primarily by the federal government and some states.
Individual ownership	a business owned and managed by one individual who assumes all risk of loss and gets all profit, also referred to as a sole proprietorship. A family -owned bakery or auto repair shop is often individually owned.
Industry	all thr producers of identical or very similar products in a market.
Inflation	an increase in prices that reduces the purchasing power of money.
In-kind support	non-cash support in the form of goods and services. Food stamps, rent subsidies, free and reduced-price school lunches, surplus food, vaccinations, public education and employment assistance provide examples.
Insurance	the pooling of money to protect against loss of income or property. Types of insurance that can be purchased include life, auto, disability, health, property, and liability. Government insurance programs include Social Security and Workers Compensation.
Insured	someone buying or covered by insurance.
Insurer	someone providing protection if a loss occurs.
Interdependence	when people depend on one another for goods and services. Because citizens of the two states are interdependent, bad weather in Florida influences the availability of orange juice in Michigan.
Intermediary	middleperson or business that helps connect prodcuers and consumers. Banks, stock brokers, and distributors are examples.
International trade	the exchange of goods and services between countries.
Interest	percentage of money paid by a borrower to a lender in return for using the lender's money.
Interview	an opportunity to promote in person ones' knowledge and skills. Interviews are most commonly used by employers seeking workers.
Inventory	the stock of unsold goods held by a business. For retailers, inventory consists of finished goods. A manufacturer's inventory includes raw materials and goods being worked on as well as finished items.
Invest	to use money or other resources in order to get more. People can invest by buying stocks and bonds. Going to college represents an investment of time as well as money.

Labels	print information attached to a good. Labels give information on clothing care, nutrition, expiration dates, and how to contact the seller. The Underwriters Laboratories (UL) label tells buyers that an electrical product has been tested for safety.
Labor laws	government rules that control the treatment of workers. Labor laws affect issues such as overtime pay, minimum pay, hours of work, children as workers, worker safety, and the rights of workers to organize unions.
Labor union	a group of workers who organize to get more pay and better working conditions. Teachers and auto workers are examples of people who have formed unions.
Liabilities	money and anything else owed.
License	government permission to provide a good or service generally used to protect consumers or workers. Restaurants, radio stations, and banks are among the businesses that must get a license or charter to operate. Some workers also must have licences, for example, taxi drivers, doctors, and barbers.
Life cycle	stages that people pass through from infancy through the teen years, then parenthood and the senior years
Lifestyle	a person's way of living. A lifestyle choice might be to live in an isolated mountain cabin or in a city apartment.
Lottery	raising money by selling tickets and awarding prizes to winning ticket holders. Many states have lotteries to increase money for the state treasury. Revenue is sometimes earmarked for a special purpose such as education or care of the elderly.
Manufacturer	a business that uses resources to make something for consumers or for other manufacturers. ALCOA manufactures aluminum and DuPont manufactures plastics used in the production of cars.
Market	any place where people buy and sell goods and services. Buyers and sellers establish the price of similar goods and services. A physical place where people can go is a shopping mall. The Internet offers a different kind of market.
Market economy	productive resources are owned and controlled by individuals and business firms. Decisions how resources are to be used are made by buyers and sellers in markets. The United States is primarily but not a pure market economy.
Market research	to collect and analyze information concerning a market. Common sources of information include customer surveys and sales figures.
Markup	the amount a seller adds to a product's cost. Stores add the cost of operating and a profit to items sold.
Mass production	making goods on a large scale, using specialization and technology.
Mediator	a person who listens to both sides of a dispute and makes suggestions for settling it. The people who are arguing are not required to follow the suggestions made.
Mixed economy	production and distribution is a combination of elements from the market and command systems. Most economies fall into this category.
Money	anything that provides a way to express price and store value. Gold, silver, shells, tobacco, beads, and paper have all been used as money.
Money supply	the total value of coins, currency and deposits held by people.
Monopoly	when a market has onle one seller for a product and the product has no close subsitute. The seller is able to control the quantity and price of what is sold.
Natural resources	"gifts of nature" used in production of a good or service such as air, water, land and animal. Natural resources are present without human intervention and are sometimes collectively referred to as "land".
Need	something people must have to live, for example, food, shelter, air, and water.
Negative externality	a cost that "spills over" to a third party. When a few students buy drugs, others in school may be affected by disruptive classmates and violence. A factory discharging chemicals into the ground may pollute the drinking water used by surrounding homes.
Negative incentive	an action that discourages behavior, for example, higher utility rates discourage use during peak hours. Legal fines discourage business activities that pollute.
Net worth	assets minus liabilities.
Nondurable good	something that lasts for only a short time, for example, food, clothing and cleaning supplies.
Nonprofit organization	a group of people that share a purpose other than to earn a profit, for example, church -run hospitals, labor unions, environmental groups, youth development organizations, political parties, museums and zoos.
Nonrenewable resources	resources that cannot be replaced once they have been used. Aluminum and natural gas are nonrenewable.
Opportunity cost	the most valuable alternative not chosen when making a decision. At the amusement park, a tour of the haunted house might be the opportunity cost for taking a ride on the roller coaster.
Packaging	materials used to inform a buyer and to protect a good during the distribution process. Egg cartons protect fragile eggs while plastic and cardboard containing batteries reduce shoplifting.
Partnership	a business owned by two or more people (partners) who assume all risk and receive all profit. Partners bring additional capital to a business. Law and accounting firms are frequently partnerships.
Patent	an inventor's right to use or sell a product or idea for seventeen years. Drug companies get patents to help them recover the money they invested while creating new medicines.
Personal selling	direct, personal contact between a seller and buyer.
Picket	to tell others about a dispute with a business by parading in front of the business with signs.
Positive externality	a benefit that "spills over" to a third party. Society benefits when students invest in higher education. When a community builds a dam to provide water for its citizens, noncitizens who like to boat and fish also benefit
Positive incentive	an action that encourages behavior. Guaranteed student loans promote higher education while tax deductions for mortgage interest encourage home ownership. Profit is the incentive for entrepreneurs.
Poverty	a condition where people have little or no income, money and goods. Causes of poverty include unemployment, a lack of economic resources such as land ownership, and social factors including discrimination.
Premium	something offered free to promote a good or service. Fast food restaurants offer toys with a child's meal. An attorney may offer a free consultation to attract new clients.
Price	amount a buyer pays and a seller receives for a good or service.
Price regulation	to set a minimum or maximum price for a good or service. Workers have a minimum wage set by the federal government. Prices charged by public utilities are set by state government agencies.
Private good	a good owned by an individual, household or business not government. A family -owned car and a factory building owned by a corporation are examples of private goods.
Producer	a person or organization that makes or sells goods and services.
Production	any activity that creates or adds value to a good or service.
Productivity	an amount of goods and services produced (output) per units of resources used (input).
Profit	revenue minus the costs of production. If it costs $2 to make lemonade and the revenue was $5, the profit is $3.
Promotion	communication designed to create an awareness of a product and encourage purchase. There are many, many promotional techniques. A seller chooses a mix of activities that may include personal selling, paid advertising, news stories, packaging, store displays, contests, trading stamps, free samples, demonstrations and coupons
Property rights	rules that guide what people can and cannot do with property. Laws, police, and the courts help guard property owners from theft. Zoning regulations limit property use to protect neighboring land owners.
Property tax	tax based on the value of something owned, typically a home or car. Schools and local street maintenance are often paid for with property taxes.
Public good or service	a good or service provided by government and paid for through taxes, for example, mail delivery, police, schools, roads, safety inspections, pollution controls and national defense.
Public utility	a privately-owned business that government allows to function as a monopoly. Public utilities provide electricity, water, gas, cable, and telephone services when the cost of competitors maintaining separate plants and services line is too high. Government controls utility prices.
Quality	desired characteristics of a good or service. Safety features, construction details, and seller guarantees are samples of quality factors.
Quota	a limit set on the amount that can be imported. Quotas create shortages which cause prices to rise benefiting both domestic and foreign producers.
Ration	to decide how a resource will be distributed. During the energy crisis of the 1970s, the government rationed crude oil to companies that made gasoline.
Recycle	to restore or use again. People reuse shopping bags and take glass bottles to recycling centers. Kitchen leftovers and grass clippings are recycled as compost.
Reduce	to cut the amount of resources used. People reduce waste by avoiding disposable products and excess packaging.
Regulation	government rules that try to control behavior.
Renewable resource	a resource that can be replaced if used carefully. Grains, wood and fish are renewable resources.
Rent	a payment for the use of land or other property.
Repossess	to take back property when a loan is in default.
Resources	people, raw materials and other things used to make goods and services; also known as inputs.
Responsibility	a duty or expectation. People have a responsibility to be fair in their exchanges with business. People have a responsibility to report shoplifting.
Retailer	a business that buys from extractors, manufacturers and wholesalers then sells to the ultimate consumer. Retailers operate stores. They also sell using the mail, door -to -door salespeople and vending machines.
Revenue	the price of a good or service multiplied by the quantity sold.
Right	something that is legal or the fair thing to do. Generally accepted consumer rights include the right to information, choice, safety, and to have complaints heard.
Risk	the chance that money or other property will be lost.
Salary	a set amount of money paid to a worker usually per week, month or year.
Sales tax	a tax paid when a good or service is bought, also referred to as an excise tax.
Save	to set aside some of today's income for the future.
Scarcity	when there are not enough resources to satisfy wants.
Service	work that is done for someone else. Services include a hair cut, mail delivery, maintenance and teaching.
Slogan	words that sound good but don't say anything.
Specialization	when people and societies produce a smaller range of goods and services than they use. For individuals, specialization refers to a person's occupation and the special training a job requires. Mechanics, librarians and cafeteria cooks are specialists.
Special sale	a special event that encourages buyers to shop and buy. Back -to -school sales, holiday sales, dollar days and clearance tables provide examples.
Standards	rules for production and distribution. Food labeling, meat inspection, and limits on worker exposure to dangers in the workplace are all examples of federal standards. State governments check gas pumps and grocery scales to make sure consumers get what they pay for.
Staple	basic goods that household try to keep on hand such as bread, milk, soap and light bulbs.
Stock	a share of ownership in a corporation. Successful companies reward investors with dividends and capital gains.
Strike	to protest by refusing to work. Workers use this tool to get better pay and working conditions.
Substitute	a good or service that can take the place of another. Green beans are a substitute for peas. UPS offers a substitute for delivery by the U.S. Postal Service.
Supply	a schedule of how much sellers are willing and able to sell at different prices in a given period of time. The amount people are willing to supply is also influenced by non -price determinants.
Surplus	when income is greater than expenses.
Tariff	a tax on imports. Tariffs raise the price of imports which increases the demand and price for domestic goods.
Tax	money people are required to pay government that is used to provide public goods and services.
Technology	machines used in the production and delivery of goods and services. Bar codes on grocery items and computers illustrate how technology can increase productivity
Tip	extra money paid to a service worker. Waiters, doorkeepers and taxi drivers are given tips.
Trade-off	choosing less of one thing in order to get more of something else. At the movie theater, choosing a smaller box of popcorn provides the money to buy a larger soda.
Trademark	a special design, name or symbol that identifies a good, service, or company. "Coke" is a trademark of the Coca-Cola company. Other people are not allowed to use the trademark or even one that looks like it might confuse buyers.
Traditional economy	production and distribution decisions are largely determined by the way things have been done in the past. There is little money. These economies are usually found in remote parts of Africa, Asia, Latin America and the Middle East where people are engaged in agriculture, fishing or hunting.
Transaction cost	a cost associated with the purchase of a good or service beyond price, for example, the time and phone calls used to learn about a product. In addition, there are the costs of negotiating and signing a contract.
Unemployment	when people are willing and able to work, but do not have jobs. Government tries to lower unemployment to provide economic security to workers. Government tries to control the behavior of consumers, producers and other entities through the creation and enforcement of regulation
Value	what a person believes is or is not important. Things people value include family, friends, and safe streets. What is important to one person may not be important to another.
Variable cost	a cost of production that changes when there is a change in the amount produced. Variable costs in the printing process include paper and ink.
Wage	a set amount of money paid per hour of work or unit of production.
Want	something that makes life more enjoyable but is not required to survive. A child may want a bicycle for fun. The bicycle becomes a need if it is required for a paper route.
Warranty	a promise by a seller to buyer that goods are as promised. A limited warranty offers less than a full warranty which by federal law must offer free repair or replacement of covered parts.
Worker	a person who makes goods or provides services.
Wealth	the value of things owned. These things include land, goods, bank accounts and ownership of businesses.
Weights and measures	standard units used in the exchange of goods and services. Flour and sugar are sold in pounds and ounces. Yards, feet and inches make it easier to purchase goods like rope, paper and wood.
Wholesaler	a business that buys large quantities from extractors and manufacturers then sells them to other businesses. Supermarkets buy groceries from wholesalers. Hospitals and schools often buy supplies wholesale.