Bus 1103_Glossary (2) - Bus 1103 Economics for Managers...

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Bus 1103 – Economics for Managers Vocabulary Scarcity  The basic economic problem that arises because people have unlimited wants but resources are limited. Because of scarcity, various economic decisions must be made to allocate resources efficiently. When we talk of scarcity within an economic context, it refers to limited  resources, not a lack of riches. These resources are the inputs of production:  land, labor and capital. People must make choices between different items because the resources  necessary to fulfill their wants are limited. These decisions are made by giving up (trading off) one want to satisfy another. Opportunity cost  - The next best alternative that must be given up when a  choice is made.  Trade-off  - Giving up some of one thing to get some of another thing.  Benefit  - The gain received from voluntary exchange.  Factors of production  - Resources used by businesses to produce goods and  services.  Capital  - All buildings, equipment and human skills used to produce goods and  services.  Decision making  - Choosing from alternatives the one with the greatest benefit  net of costs.  Exchange  - Trading goods and services with others for other goods and services or for money (also called trade).  When people exchange voluntarily, they expect  to be better off as a result.  Demand  - A schedule of how much consumers are willing and able to buy at all  possible prices during some time period.  
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Demand decrease  - A decrease in the quantity demanded at every price; a shift  to the left of the demand curve.   Demand increase  - An increase in the quantity demanded at every price; a shift  to the right of the demand curve.   Determinants of demand  - Factors that influence consumer purchases of  goods, services, or resources.   Determinants of supply  - Factors that influence producer decisions about  goods, services, or resources.  Economic system  - The collection of institutions, laws, activities, controlling  values, and human motivations that collectively provide a framework for  economic decision making.   Economic wants  - Desires that can be satisfied by consuming a good or a  service.  Some economic wants range from things needed for survival to things  that are nice to have.  Equilibrium price  - The market clearing price at which the quantity demanded  by buyers equals the quantity supplied by sellers.  Law of demand  - The principle that price and quantity demanded are inversely  related.   Law of supply  - The principle that price and quantity supplied are directly  related.  Market 
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