Economics Concepts and Terms Unit 1

Production

• The act of creating goods and services by combining resources.

• A method of distributing goods and services in an economy.

• The process of combining land, labour, capital, and enterprise to provide goods and services in an economy.

• A strategy for marketing products to consumers.

Recurrent wants

• Wants that are easily satisfied and do not return.

• Wants that are satisfied once and never return.

• Wants that are never satisfied and keep recurring, for example, food.

• Wants that can be satisfied temporarily but return later.

Opportunity cost

• The cost of producing one more unit of a good or service.

• The best alternative opportunity forgone when a choice is made, often referred to as ‘real cost’ or ‘economic cost’.

• The total cost of all resources used in production.

• The monetary value of a good or service.

Economics

• The study of the ways in which a society decides to use its scarce resources to satisfy unlimited wants.

• The analysis of how individuals can maximize their utility in a market economy.

• The examination of government policies and their impact on economic growth.

• The exploration of historical economic systems and their evolution over time.

Government intervention

• Action by the government that affects economic activity, resource allocation, and normal market operations to help achieve economic goals.

• A policy that encourages free market operations without any government influence.

• A strategy to reduce taxes and increase government spending.

• An approach to eliminate all forms of regulation in the economy.

Economic growth

• A temporary increase in the prices of goods and services.

• A sustained increase in the productive capacity of an economy over a specific period, usually indicated by increased availability of goods and services.

• A decrease in the unemployment rate without any change in production.

• An increase in the population without any change in economic output.

Market

• A place where goods are manufactured.

• A place or situation where buyers and sellers interact for purposes of trade or exchange.

• A location for agricultural production only.

• A venue for entertainment and leisure activities.

Complementary wants

• Wants that go together, for example, house, furniture, and plants.

• Wants that are unrelated, such as food and clothing.

• Wants that are only for luxury items, like cars and jewelry.

• Wants that are necessary for survival, like water and shelter.

Socialism

• An ideology based on the view that most means of production should be publicly owned and directed towards community needs rather than private profit.

• A political system where the government controls all aspects of life and economy.

• A belief that individuals should have complete freedom in economic activities without government intervention.

• A system where all property is privately owned and operated for profit.

Market mechanism

• The interaction of the forces of demand and supply to determine the price at which a commodity is sold.

• A system where the government sets prices for all goods and services.

• A method of trading that eliminates the need for currency.

• A process that only considers consumer preferences without regard to supply.