| Term | Definition |
| Economic System | The way in which a society uses its scarce resources to satisfy its people's unlimited needs and wants. |
| Opportunity Cost | The loss of potential gain from other alternatives when one alternative is chosen. |
| Alternative Cost | What you give up when making an economic choice. |
| Market | An arrangement that allows buyers and sellers to exchange things. |
| Competition | The struggle among producers for the dollar of consumers; the regulating force in the free market. |
| Traditional Economy | Economic system that relies on habit, custom, or ritual to decide questions of production and consumption of goods and services. |
| Centrally Planned (Command) Economy | Economic system in which the central government makes all economic decisions on the production and consumption of goods and services. |
| Free Market Economy | Both centrally and planned and free market economy; decisions are made by societies. |
| Factors of Production | Land, labor, capital |
| Goods | Physical objects such as shoes and shirts. |
| Services | Actions or activities that one person performs for another. |
| Laissez Faire | Hands off; no government interference. |
| 6 Economic Goals | Economic efficiency, economic freedom, economic security and predictability, economic equity, economic growth and innovation |
| Guns and Butter | Refers to the trade-offs that nations face when choosing to produce more or less military or consumer products. |
| Physical Capital | A factor of production. |
| Scarcity | Implies limited quantities of resources to meet unlimited wants. |
| Shortage | A situation in which a good or service is unavailable. |
| Entrepreneur | Ambitious leaders who combine land, labor and capital to create and market new goods and services. |
| Bill Gates | Co-founder of Microsoft Corporation; richest man in the world. |
| Steve Jobs | Founder of Apple Inc. |
| T.A.N.F. | Federal money goes to the states who design their own welfare programs. |
| Medicare | For people 65 years and over. |
| Unemployment | Funded by state and federal government, provides money to eligible workers who have lost their job; workers must show they have made efforts to get work. |
| Social Security | Payroll taxes are collected from current workers and redistributed to the elderly and disabled. |
| EPA | Protect people and the environment from significant health risks, sponsors and conducts research. |
| SEC | Security Exchange Commission - Regulates the stock market. |
| FDA | Responsible for protecting the public health by assuring the safety, efficiency and security of human and veterinary drugs. |
| EEOC | Enforces laws that makes discrimination illegal in the work place. |
| FCC | Regulates interstate and international communications through cable, radio, TV, satellite and wire. The goal is to promote connectivity and ensure a robost and competitive market. |
| CPSC | Protects the public from unreasonable risks of serious injury or death from thousands of types of consumer products. |
| FAA | Works to ensure air travel is safe. |
| Poverty Threshold | Income level below what is needed to support a household. |
| Safety Net | Designed to protect people from economic hardships (food stamps, medicaid, etc.). |
| Externality | An economic side effect of a good or service that generates benefits or costs to some one other than the person deciding how much to produce or consume. |
| Zoning Laws | Laws in a city that separate residency and businesses. |
| Public Goods | A shared good or service for which it would be impractical to make consumers pay individually and to exclude nonpayers. |
| Law of Supply | The higher the price, the larger the quantity produced. |
| Law of Demand | Consumers buy more of a good when its price decreases and buy less when its price increases. |
| Shift Factors - Supply and Demand | Left Shift - Decrease, Right Shift - Increase |
| Equilibrium | The point at which quantity demanded and quantity supplied are equal. |
| Disequilibrium | Describes any price or quantity not at equilibrium; when quantity supplied is not equal to quantity demanded in a market. |
| Graphing Supple/Demand Curves | Represents the demand schedule, all reflect the law of demand. |
| Normal Goods | A good that consumers demand more of when their income increases. |
| Complementary Goods | Generic goods. |
| Elastic | Consumer demand will change considerably as a result of a price change, there are many alternatives or substitutes for the good or service. |
| Inelastic | Consumer demand will not change much with a price change, the good is considered a necessity or there are few alternatives. |
| Capital Gain | The difference between a higher selling price and a lower purchase price, resulting in a financial gain for the seller. |
| Dividend | The portion of corporate profits paid out to stockholders. |
| Investment | The act of redirecting resources from being consumed today so that they may create benefits in the future; the use of assets to earn income or profit. |
| Bookerage Firm | A business that specializes in trading stocks. |
| Bull Market | A steadily rising market. |
| Bear Market | A steadily declining market. |
| New York Stock Exchange | The country's most profited market. |
| Day Trader | The buying and selling of securities on the same day, often online, on the basis of small short-term price fluctuations. |
| Profit | The financial gain made in a transaction. |
| Corporate Bond | A bond that a corporation issues to raise money in order to expand its business. |
| Liability | The legally bound obligation to pay debts. |
| Corporation | A legal entity owned by individual stockholders. |
| Sole Proprietorship | A business owned and managed by a single individual. |
| Franchise | The right to sell a good or service within an exclusive market. |
| Horizontal Merger | The combination of 2 or more firms competing in the same market with the same good or service. |
| Vertical Merger | The combination of 2 or more firms involved in different stages of producing the same good or service. |
| Conglomerate | Business combination merging more than 3 businesses that make unrelated products. |
| Multinational | Large corporation that produces and sells its goods and services throughout the world. |
