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| Economics | The study of how we make decisions in a world of limited resources. |
| Microeconomics | Studying the economic decisions made by individuals and businesses. |
| Macroeconomics | Studying the economy as a whole and decisions made by larger units such as the government or entire industries. |
| Opportunity Cost | The cost of the next best alternative use of time or money when choosing to do one thing instead of another. |
| Resource | Something used to make something else. |
| Economic Model | Charts, graphs, or another representation used to help us make economic decisions. |
| Trade-Off | The alternative you face if you decide to do one thing rather than another. |
| Marginal Cost | The cost of producing one more of an item. |
| Marginal Benefit | The benefit or money made from producing one more of an item. |
| Cost-Benefit Analysis | A comparison of the cost of production versus the benefit of production. |
| Fixed Costs | Expenses that are the same no matter how much or how little you produce. |
| Variable Costs | Expenses that change when the number of items produced changes. |
| Total Costs | Fixed costs plus variable costs equal total costs. |
| Goods | Goods are products that we use to satisfy our wants and needs. |
| Services | Services are work performed by a person for someone else. |
| Factors of Production | Resources needed to produce goods and services. |
| Natural Resources | Things we find in nature used to make goods or services. |
| Laissez-Faire economics | The government does not regulate the economy or is “hands-off.” |
| Labor | The human effort used to produce goods or services. |
| Capital | Previously manufactured goods used to make new goods and services. |
| Entrepreneur | People who start a business or invent a new product. |
| Traditional Economy | An economic system in which people do things the way they have always been done which emphasizes the trading and bartering of products and services. |
| Command Economy | An economic system in which the government owns all the factors of production (land, factories) and makes all the decisions. |
| Market Economy | These are also called capitalist economies. It is an economic system in which citizens own the factors of production. In a market economy, supply (what producers offer for sale) and demand (what consumers are able and willing to buy) determine what producers produce and how much they produce. |
| Mixed Economy | An economic system that combines elements of a command and market economy. |
| Wants | Things we would like to have. |
| Needs | Things that are necessary for survival. |
| Invisible Hand | The idea that there are unseen motivations for producers and consumers that cause a market economy function for the best interest of everyone. |
| Human Capital | Investing in employees to help in the production of goods and services. |
| Republic or Representative Democracy | Ruled by the people typically through a representative body and governed by a Constitution. |
| Constitutional Monarchy | When a monarch is limited by a Constitution and often serves as a symbolic leader of their country. |
| Anarchy | The absence of a governing body. |
| Absolute Monarchy | Rule by a King or Queen, power is passed down hereditarily, without limits. |
| Communism | Type of command economy when one political party holds power and makes all the economic decisions with the stated goal of making progress towards greater economic equality. There is no private ownership or social class distinctions. The production of goods is to provide for basic needs. |
| Socialism | Type of command economy in which a government owns the factors of production and states to seek a more fair distribution of property and labor. There is limited private ownership and limited social class distinctions. The production of goods is to provide for societal needs. |
