FINAL STUDY GUIDE
Traditional economy: Economic system in which the allocation of scarce resources and other economic activities are based on ritual, habit, custom. Corporation: Form of business organization recognized by law as separate legal entity.
General partnership: Form of partnership where all partners are equally responsible for management, debt.
Economic goals: Freedom, efficiency, equity, security, employment, stability, grown, future goals.
Substitutes: Competing products that can be used in place of one another.
Demand schedule: A table that lists how much of a product consumer will buy at all possible prices.
Markets: Meeting place or mechanism allowing buyers and sellers of an economic product to come together may be local, regional, national, or global.
Capital market: Market in which financial capital is loaned and/or borrowed for more than 1 year.
Primary market: Market in which only the original issuer can sell or repurchase a financial asset.
Secondary market: Market in which financial assets can be sold to someone other than the original issuer.
Trade-off: alternative that is available whenever a choice is to be made.
Economic interdependence: Mutual dependency of one person’s, firm’s, or region’s economic activities on another’s.
Proprietorships: business owned and run by a single person who has the rights to all profits and unlimited liability for all debts of the firm.
Surplus: Situation where quantity supplied is greater than quantity demanded at a given price.
Price ceiling: Highest legal price that can be charged for a product.
Cooperative: Nonprofit association performing some kind of economic activity for the benefit of its members.
Command economy: Economic system with a central authority that makes the major economic decisions.
Market economy: Economic system in which supply, demand, and the price system help people make economic decisions and allocate resources.
Mixed economy: Economic system that has some combination of traditional command, and market economics.
Deficiency payments: Cash payment making up the difference between the market price and the target price.
Total costs: The sum of fixed costs and variable costs.
Fixed costs: Costs that remain the same regardless of level of production or services offered.
Entrepreneur: Risk-taking individual in search of profits.
E-commerce: Electronic business conducted over the Internet.
Call option: Futures contract giving a buyer the right to cancel a contract to buy something.
Put option: Futures contract giving a buyer the right to cancel a contract to sell something.
Good: Tangible economic product that is useful, relatively scare, and transferable to others.
Consumer good: Good intended for final use by consumers rather than businesses.
Durable good: A good that lasts for at least 3 years when used regularly.
Nondurable good: A good that wears out or lasts for fewer than 3 years when used regularly
Capital good: Tools, equipment, and factories used in the production of goods and services.
Voluntary exchange: Act of buyers and sellers freely and willingly engaging in market transactions.
Price-fixing: Agreement, usually illegal, by firms to charge the same price for a product.
Oligopoly: Market structure in which a few large sellers dominate the industry.
Trust: Illegal combination of corporations or companies organized to hinder competition.
Diminishing returns: Stage where output increases at a decreasing rate as more units of variable input are added.
Change in supply: Situation where different amounts are offered for sale at all possible prices in the market; shift of the supply curve.
Rationing: System of allocation goods and services without prices.
Monopoly: Market structure with a single seller of a particular product.
Limited partnership: Form of partnership where one or more partners are not active in the daily running of the business and have limited responsibility