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| Economics | the study of how to meet unlimited wants and needs of a society with its limited resources. |
| Resources | all things used in producing goods and services. |
| Economic resources | are land, labor, and capital resources that can be used to produce the goods and services that people consume. |
| Land | a natural resource, includes everything contained in the earth and found in the sea. |
| Labor | human resources, includes all workers in the economy, including full- and part-time workers, managers, public employees, and professional people. |
| Capital | the money needed to start and operate a business, as well as goods used in the production of other goods. |
| Scarcity | when more goods and services are desired than are available. |
| Economic goods | are tangible items. |
| Economic services | are intangible items. |
| Entrepreneurship | incorporates the skills of people who are willing to take the risk of starting their own business. |
| Utility | the added value or usefulness of a product. |
| Form utility | value added by changing raw materials or putting parts together to make them more useful. |
| Place utility | value added by having a product where customers can buy it. |
| Time utility | value added by having a product at a certain time of year or a convenient time of day. |
| Possession utility | value added by exchanging a product for some monetary value. |
| Information utility | value added by communicating with the consumer. |
| Three basic economic questions | What, how, and for whom should the goods and services be produced. |
| Market economy | little government involvement in answering the three basic economic questions, consumers decide. |
| Command economy | the government answers the three basic economic questions. |
| Traditional economy | the system is based on the ways things have always been done. |
| Mixed economies | not pure market systems, nor are they completely controlled by the government. |
| Capitalism | the people elect the government officials who represent their constituents’ interests. |
| Socialism | increased government involvement, with the goal of reducing the differences between the rich and the poor. |
| Communism | have a government that is run by one political party and that party controls everything. |
| Supply | the amount of goods producers are willing and able to produce and sell at a given price during a certain period of time. |
| Demand | a consumer’s willingness and ability to buy products at a given price during a certain period of time. |
| Law of Supply and Demand | principle that states the supply of a good or service will increase when demand is great and decrease when demand is low. |
| Elasticity | the degree to which demand for a product is affected by its price. |
| Elastic demand | refers to how changes in the price of a product affect demand for that product. |
| Inelastic demand | refers to a condition in the market where changes in the price of a product have very little affect on the demand for that product. |
| Business cycle | the movement of an economy through four recurring phases – prosperity, recession, depression, and recovery. |
| Prosperity | Highest period of economic growth, low unemployment, high output of goods and services, high consumer spending, increased attendance and purchasing of related merchandise. |
| Recession | Economic slowdown, rise in unemployment, production slows down, decrease in consumer spending, decrease in attendance and purchasing of related merchandise. |
| Depression | Prolonged recession, extremely low consumer spending, high unemployment, drastic decrease in production of products, poverty can result, lowest point of attendance and few related items are purchased. |
| Recovery | Renewed economic growth and an increase in output of goods and services, reduced unemployment, increased consumer spending, moderate business expansion, gradual increase in leisure time activities and purchase of related merchandise. |
| Competition | a rivalry between two or more businesses to gain as much of the total market sales or customer acceptance as possible. |
| Direct competition | two or more companies that utilize the same type of business format. |
| Indirect competition | two or more retailers that employ different types of business formats to sell the same type of goods. |
| Price competition | focuses on the selling price of a product. |
| Non-price competition | based on factors that are not related to price. |
| Monopolies | one company has exclusive control over a product or the means of producing it. |
| Profit | the money earned from conducting business after all costs and expenses have been paid. |
| Loss | a decrease in a potential profit. |
| Risk | the potential for loss or failure. |
| Risk management | discusses how to effectively manage losses due to risk. |
| Freedom of ownership | the ability to choose a house, car, job or business. |
| Sole proprietorship | a business owned and operated by one person. |
| Unlimited liability | the business owner is liable for all business losses including the initial investment and the ability of the owner to pay. |
| Partnership | a business owned and operated by two or more people. |
| General partnership | both partners agree to share equally in the profit and/or loss of the business. |
| Limited partnership | each partner is liable for any debts of the business up to the amount of his/her investment. |
| Corporation | a legal entity that is chartered by the state in which the business is located. |
| Private (closed) corporations | do not offer shares of stock for sale to the general public. |
| Public (open) corporations | offer shares of stock for sale to the general public. |
| Subchapter “S” corporations | taxed like a sole proprietorship and limited to 35 or less shareholders. |
| Free enterprise | encourages individuals to start and operate their own business with limited government involvement. AKA: private enterprise. |
| Franchise | a business or organization with the right to use an established name and sell trademarked products. |
