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| Term | Definition |
| Barter | The act of trading goods and services between two or more parties without the use of money. |
| Capitalism | An economic system that is characterized by private property, freedom of economic exchange, competitive markets and limited government intervention. Supply and demand set prices in the market (not the government) |
| Command
Economy | An economic system in which production, investment, prices, and incomes are determined centrally by a government. |
| Communism | Economic and social system in which all (or nearly all) property and resources are collectively owned by a classless society and not by individual citizens. |
| Competition | Rivalry among producers/sellers trying to satisfy the wants and needs of consumers in hopes of increasing sales, profit, market share, etc… |
| Consumer Price
Index (CPI) | A measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food and medical care. |
| Depression | A severe and prolonged downturn in economic activity; an extreme recession that lasts two or more years. Characterized by increases in unemployment, a drop in available credit, diminishing output, bankruptcies, reduced trade and commerce, fewer investments, and reduced consumer confidence |
| Economy | The wealth and resources of a country or region, especially in terms of the production and consumption of goods and services. |
| Expenses | The economic costs that a business incurs through its operations to earn revenue; the opposite of revenue. Examples include payments to suppliers, employee wages, factory leases and depreciation. |
| Factors of
Production | An economic term to describe the inputs (resources) that are used in the production of goods or services in the attempt to make an economic profit. The factors of production include land, labor, capital and entrepreneurship. |
| Free Enterprise | An economic system where few restrictions are placed on business activities and ownership. Governments generally have minimal ownership of enterprises in the market place. |
| Freedom of
Choice | A voluntary exchange between buyer and seller, free of coercion and force. When exercised by all market participants, their collective actions will determine what is produced, what is consumed, and the price at which the exchange will take place. |
| Gross Domestic
Product (GDP) | The monetary value of all the finished goods and services produced within a country's borders in a specific time period; includes all of private and public consumption, government outlays, investments and exports less imports. (Gross National Product) |
| Gross Income | 1) An individual's total personal income before taking taxes or deductions into account. 2) A company's revenue minus cost of goods sold. |
| Incentives | A benefit, reward, or cost that motivates an economic action. |
| Income Statement | One of the three major financial statements; this statement measures a company's financial performance over a specific accounting period by summarizing revenues and expenses.
Formula: Revenue - Expenses = Net Profit or Loss |
| Inflation | The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling. |
| Infrastructure | The basic physical systems of a business or nation (Transportation, communication, sewage, water and electric systems) High-cost investments, however, they are vital to a country's economic development and prosperity. |
| Invisible Hand | The invisible hand is essentially a natural phenomenon that guides free markets and capitalism through competition for scarce resources. |
| Market
Economy | An economy in which decisions regarding investment, production, and distribution are based on supply and demand, and prices of goods and services are determined in a free price system. |
| Monopoly | A single company or group owns all or nearly all of the market for a given type of product or service; An absence of competition, which often results in high prices and inferior products. |
| Net Income / Net Profit | A company's total profit; often referred to as 'the bottom line'. Calculated by taking revenues and adjusting for the cost of doing business (Expenses, such as depreciation, interest, taxes. This number is found on a company's income statement.
Formula: Total Revenue -Total Expenses = Net Profit |
| Peak | The highest point between the end of an economic expansion and the start of a contraction in a business cycle. The peak of the cycle refers to the last month before several key economic indicators, such as employment and new housing starts, begin to fall. |
| Private Property
Rights | Laws created by governments in regards to how individuals can control, benefit from and transfer property. |
| Profit | A financial benefit that is realized when the amount of revenue gained from a business activity exceeds the expenses, costs and taxes needed to sustain the activity. |
| Prosperity / Expansion | The phase of the business cycle when the economy moves from a trough to a peak. It is a period when business activity surges and gross domestic product expands until it reaches a peak. Also known as an "economic recovery." |
| Recession | An economic contraction characterized by two consecutive quarters of negative economic growth as measured by a country's gross domestic product (GDP) |
| Revenue | The amount of money that a company/individual actually receives during a specific period, including discounts and deductions. It is the "top line" or "gross income" figure from which costs are subtracted to determine net income. |
| Scarcity | Economic problem that arises because people have unlimited wants but resources are limited. Because of this problem, various economic decisions must be made to allocate resources efficiently. |
| Socialism | An economic and political system based on public ownership of the means of production with emphasis on equality rather than achievement.; individuals are dependent on the state for everything. Examples include China, Vietnam and Cuba |
| Taxes | An involuntary fee levied on corporations and individuals that is enforced by the government in order to finance government activities. |
| Trade-Offs | When choices are made (collectively or by an individual) to accept having less of one thing in order to get more of something else |
| Traditional Economy | An underdeveloped economy in which communities use primitive tools and methods to harvest and hunt for food, often resulting in little economic growth. |
| Trough | The stage of the economy's business cycle that marks the end of a period of declining business activity and the transition to expansion. |
| Voluntary
Exchange | The act of buyers and sellers freely and willingly engaging in market transactions; transactions are made in such a way that both the buyer and the seller are better off after the exchange than before it occurred. |
