Glossary Terms by Benchmark

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Individual and Household Choices
Needs and Wants
People have different needs and wants that are influenced by their values, goals, lifestyle, and stage in life cycle.
Goal Life cycle Lifestyle
Need Value Want

Goods and Services
Goods and services satisfy our economic needs and wants. People's wants are unlimited.
Complementary good Durable good Good
Nondurable good Service Staple
Substitute

Production and Consumption
People acquire goods and services through production and consumption.
Consumer Consumption Employee
Interview Producer Production

Scarcity
Resources are used to produce the goods and services that satisfy wants. While resources are limited, we have unlimited wants. This scarcity encourages us to conserve resources.
Conservation Nonrenewable resources Recycle
Reduce Renewable resource Resources
Scarcity

Decision Making
Through the decision making process, people consider the costs and benefits of alternatives. Steps in the process are:

  • Define the problem
  • Gather information
  • Explore Alternatives
  • Make the Decision
  • Take Action
  • Evaluate Decision

Alternatives Benefit Choice
Cost Decision making Opportunity cost
Trade-off

Income and Wealth
People earn income in exchange for work. How much a person earns depends on the job, a person's abilities , and their performance. Income is also received through gifts and the use of wealth.
Income Interest Rent
Salary Tip Wage
Wealth

Spending
People use shopping lists and budgets to plan how they will use income and wealth to achieve goals. They research purchases to maximize satisfaction.
 
Budget Comparison shop Deficit
Fixed expenses Flexible expense Impulse buying
Surplus Transaction cost

Saving and Investing
Saving and investing are alternatives to spending.
 
Bond Checking account Compound interest
Invest Risk Save
Stock

Insurance
People protect income and wealth by sharing risk.
 
Insurance Insured Insurer

Credit
Credit lets people buy goods and services now with a promise to repay in the future. When deciding whether to lend money, a creditor considers the borrower's ability to repay the loan. The borrower's income, property, and past credit payment history will be examined.
 
Credit Credit limit Creditor
Debt Debtor Repossess

Business Choices
Business

Resources
The production of goods and the provision of services by businesses (and others) requires resources.
 
Capital resources Human resources Natural resources

Production and Distribution
Business activites are diverse and interdependent. Among the activities that bring goods and services to the ultimate consumer are the extraction of resources, manufacturing, packaging, transporting, storage, financing, promotion, provision of services and sales.
 
Distributor Extractor Financial institution
Intermediary Inventory Manufacturer
Packaging Retailer Wholesaler

Productivity
A business increases output through specialization, technology, and capital investments.
 
Capital investments Division of labor Economies of scale
Mass production Productivity Specialization
Technology

Business Organization
While some businesses organize the factors of production to earn a profit, others organize for nonprofit social and religious goals. The most common forms of for-profit businesses are: sole proprietorship, partnership, and corporation.
 
Corporation Individual ownership Nonprofit organization
Partnership

Profit
The goal of business is to achieve a profit.
 
Fixed cost Profit Revenue
Variable cost

Raising Capital
Starting a business and expanding it requires money. Owners can choose to use some of their profit or go outside the company by selling stocks and bonds.
 
Assets Capital Entrepreneur
Liabilities Net worth

The Role of Government
Government provides the legal and social foundation required by a market economy. Specific roles of government in the United States are:

  • Provide public goods and services
  • Establish legal and social frameworks
  • Maintian competition
  • Correct for externalities
  • Redistribute income and wealth
  • Promote economic growth and security

Public Goods and Services
It is difficult to limit the use of some goods and services to just those who pay for them. Government steps in when businesses are unable or unwilling to provide those goods and services.
 
Private good Public good or service

Legal and Social Framework
Government institutions help the market economy work better. Laws and the judicial system protect consumers and producers by establishing property rights, creating fairness laws, enforcing contracts, and providing a means for conflict resolution.
 
Contract Copyright Discrimination
Equal Opportunity Programs Labels Labor Laws
Patent Property Rights Trademark

Regulation
Government tries to control the behavior of consumers, producers, and other entities through the creation and enforcement of regulation.
 
Grade License Price regulation
Ration Regulation Standards
Weights and measures

Fiscal Policy
Government uses spending and taxes to redistribute resources and influence behavior. To promote employment and economic growth, government can:

  • Reduce taxes which gives people extra money to spend
  • Increase government spending on goods and services

When inflation is a concern, government may increase taxes and decrease government spending.
 
Fee Income tax Lottery
Property tax Sales tax Tax

Competition
A perfectly competitive market has many buyers and sellers for identical products with no one player having control over price.
 
Competition Industry Monopoly
Public Utility

Externalities
The costs and benefits of market transactions sometimes "spill over" to a third party other than the direct consumer and producer. To correct for negative externalities, the government restricts activities and uses tax incentives. Subsidies are offered to encourage positive externalities.
 
Negative externality Positive externality

Redistribute Income
To correct for some of the disparities created by a market system and for humanitarian reasons, public policies transfer resources from one group of people to another. Cash and noncash assistance programs are funded through higher taxes and higher prices.
 
Cash assistance In-kind support Poverty

Economic Growth and Security
The government builds roads, public education, and research to encourage economic growth. Government also tries to minimize unemployment and stabilize prices associated with the ups and downs of a market economy.
 
Consumer Price Index (CPI) Depression Economic growth
Gross Domestic Product (GDP) Inflation Unemployment

Monetary Policy
The Federal Reserve System, a quasi-independent federal agency and the central bank of the United States, promotes economic growth and higher employment by reducing interest rates and increasing the money supply. Reversing these actions reduces spending amd eventually, inflation. The FED includes the Board of Governors, the Federal Advisory Council, the Federal Open Market Committee, 12 Federal Reserve banks, 25 branches, and member banks.
 
Money Supply

Economic Systems
Like individuals, societies must decide how scarce resources will be allocated. Our choices involve tradeoffs.

  • What will be produced?
  • How will it be produced?
  • Who will benefit from the production?

Market determined prices reward efficiency and higher levels of production.
 
Command economy Economic system Market economy
Mixed economy Negative incentive Positive incentive
Traditional economy

Markets
Market economies are directed by prices. As the price of an item goes up, sellers are encouraged to supply more and buyers are influenced to buy less. When the price falls, the opposite occurs. Sellers use both price and quality to attract buyers. Prices for different products are interrelated.
 
Demand Market Price
Quality Supply

Marketing
Marketing brings buyers and sellers together. Sellers have a variety of ways they promote a product. On the positive side, these activities:

  • provide information about prices, new goods, and features
  • increase buyer demand which helps the economy
  • helps create competition
  • pay for magazines, newspapers, and television programs

On the negative side, marketing can:

  • increase the price we pay for goods and services
  • tempt us to buy things we don't need
  • mislead buyers

Advertisement Bandwagon Brand name
Coupon Discount Display
Generic brand Market research Markup
Personal selling Premium Promotion
Slogan Special sale

Rights and Responsibilities
Bargain Caveat Emptor Responsibility
Right Warranty

Problem Resolution
Arbitrator Boycott

Trade
Scare resources are not equally available to all producers so producers specialize--making goods and services most suited to their resources. People trade to get what they do not produce. They have a greater selection of goods and services to choose from, often at lower costs than would be available at home. Trade occurs between individuals, organizations, and nations.

Exchange
Barter Interdependence

International Trade
Trade among nations encourages specialization which increases efficiency and world-wide production. Despite its advantages, nations sometimes create barriers to trade. Reasons given for the restrictions include protection of domestic jobs, national security, and promotion of new industries.
 
Export Import International trade
Quota Tariff

Money
Money makes exchange easier. Different countries use different currencies.
Check Coin Credit card
Currency Money supply Demand
Market Price Quality
Supply

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