Free Market system built on private ownership;The idea that owners of capital have property rights that entitle them to earn a profit as a reward for putting their capital at risk in some form of economic activity

Free Enterprise System
The freedom of private businesses to operate competitively for profit with minimal government regulation.

Voluntary Exchange
The process of willingly trading one valuable commodity (good, service, or resource) for another.

Private Property Rights
The exclusive authority to determine how a resource is used. All economic goods have a property rights attribute. This attribute has three broad components
  1. The right to use the good
  2. The right to earn income from the good
  3. The right to transfer the good to others

Returns, proceeds, or revenue, as from property or investments.

Profit Motive
The desire for profit that motivates one to engage in business ventures.

Consumer Sovereignty-
It is the power of consumers to decide what gets produced.

Mixed Economy
An economy in which there are elements of both public and private enterprise.

Modified Enterprise Economy
An economic system that has bases on capitalism but has some government interference so there is no monopoles.

Means of Production
refers to physical, non-human, inputs used in production including factories, machines, and tools; along with both infrastructural capital and natural capital.

Based on how available a product is. Scarcity is the basis of any economy because it creates a demand.

Based on the availability of products. Value is the reason goods/services are produced and purchased.

How much the value of a product or service pleases the consumer, or how useful it is.

An accumulation of all the things you own that have value.

Sole Proprietorship
A business organization that is unincorporated and has only one owner.

One who owns or owns and manages a business or other such establishment.

Unlimited liability
A type of investment in which a partner or investor can lose an unlimited amount of money opposite of limited liability.

Company's merchandise, raw materials, and finished and unfinished products which have not yet been sold.

Limited life
In a sole proprietorship, the business will only last as long as the proprietor is still alive.

A business owned by two or more people.

Limited partnership
At least one partner is not involved in day to day decisions, most often, they are providing financial support

A condition in which a business cannot meet its debt obligations and petitions a federal district court for either reorganization of its debts or liquidation of its assets.

Form of business organization recognized by law as a separate legal entity having all the rights of the individual.

A formal written statement of the aims, principles, and procedures of an organization

An instrument that signifies an ownership position (called equity) in a corporation, and represents a claim on its proportional share in the corporation's assets and profits.

Somebody who owns one or more shares of a company's stock.

One who owns shares of stock in a corporation or mutual fund.

Portion of corporate profits paid out to stockholders.

A debt instrument issued for a period of more than one year with the purpose of raising capital by borrowing.

The initial amount of money that was invested or borrowed.

Price a borrower pays for the use of money they borrow from a lender.

Double Taxation
income taxes that are paid twice on the same source of earned income.

Two legal entities becoming one legal entity.

Income Statement
A document generated monthly and/or annually that reports the earnings of a company by stating all relevant income and all expenses that have been incurred to generate that income.

Net Income
In business, what remains after subtracting all the costs (namely, business, depreciation, interest, and taxes) from a company's revenues.

A non-cash expense that reduces the value of an asset as a result of wear and tear, age, or obsolescence.

Cash Flow
Movement of cash into or out of a business, a project, or a financial product

Horizontal Merger
A merger occurring between companies producing similar goods or offering similar services.

Vertical Merger
Merger between a company that supplies goods and services and a company that buys those goods and services.

A large business organization that consists of a number of companies that deal with a variety of different business, manufacturing, or commercial activities.

Operating or having investments in several countries.

Nonprofit Organization
An incorporated organization which exists for educational or charitable reasons, and from which its shareholders or trustees do not benefit financially.

A jointly owned enterprise engaging in the production or distribution of goods or the supplying of services, operated by its members for their mutual benefit, typically organized by consumers or farmers.

Credit union
A cooperative group that makes loans to its members at low rates of interest.

Labor Union
An organization of wage earners that is set up to serve and advance its members' interests in terms of wages, benefits, and working hours and conditions

Collective Bargaining

The process by which wages, hours, rules, and working conditions are negotiated and agreed upon by a union with an employer for all the employees collectively whom it represents.

Professional Association

An association of practitioners of a given profession

Chamber of Commerce

An association, primarily of people in business, to promote the commercial interests of an area

Better Business Bureau

Any of a nationwide system of local organizations, supported by business, whose function is to receive and investigate customer complaints of dishonest business practices.

Public Utility

A business enterprise, as a public-service corporation, performing an essential public service and regulated by the federal, state, or local government

Gross Domestic Product
The total dollar amount, before taxes, of all final goods and services
that are produced within an economy.

National Income Accounting

The study of the methods of measuring the aggregate output and aggregate income of an economy.

Intermediate Products

Goods used in production of final goods.

Secondhand Sales

The sale of used products.

Non-market Transactions

Transactions covering goods or services that their producers supply to others free or at prices that are not economically significant.

Underground Economy

Refers to both legal activities, such as often found in construction and services industries where taxes are not withheld and paid, and illegal activities, such as drug dealing and prostitution.

Gross National Product (GNP)

Measure of national income and output that is used in economics to estimate total economic activity in a country or region.

Net National Product

is the total market value of all final goal and services produced by residents in a country or other polity during a given period (Gross National Product minus deprecation).

National Income

Total market value of all final goods and services in an economy, based on the total income earned by a country's people, including labor and capital investment, but not including taxes.

Personal Income

Total amount of money before taxes

Disposable Personal Income

Total amount of money after taxes

Output-Expenditure Model

Y = C+I+G. Since, C depend on (Y-T) where Y is the output or income, T is Tax Revenue. C is consumption expenditure, I is Investment expenditure and G is govt. expenditure.

Net Exports of Goods and Services

The smallest of the four expenditures, averaging around 2 percent of gross domestic product

Is a rise in the general level of prices of goods and services in an economy over a period of time.[

Price Index

A normalized average of prices for a given class of goods of services in a given region, during a given interval of time.

Base Year

Year used as the beginning or the reference year for constructing an index, and which is usually assigned an arbitrary value of 100.

Market Basket

Also called a commodity bundle, refers to a fixed list of items used specifically to track the progress of in an economy or specific market.

Consumer Price Index
An index of the cost of all goods and services to a typical consumer

Producer Price Index
An index that shows the cost of resources needed to produce manufactured goods

Current GDP

GDP not adjusted to remove the negative effects of inflation

Real GDP
GDP when distortion caused by inflation is removed.

GDP in Constant Dollars

Another name for the real GDP

an official count of a population


relating to or concerned with a city or densely populated area


related to a small town or countryside.

Center of Population


a scientist who studies the growth and density of populations

Fertility rate

the ratio of live births in an area to the population of that area

Life Expectancy

time span someone is expected to live based on statistical data

Net Immigration

the total amount of immigration

Baby Boom

a period of time after World War ll with an increased birth rate

Population Pyramid

shows the distribution of a population by age and sex

Dependency Ratio

The number of nonworking members compared to working members for a given population

a sustained increase in the overall price level

Frictional Unemployment
new workers looking for jobs and people between jobs

Structural Unemployment
as technologies become obsolete, the individuals using that technology become unemployed. Their skills are outdated.

Cyclical Unemployment
results from downturns in the business cycle

Seasonal Unemployment
results from changes in hiring patterns due to the time of year.

Price level
The overall measure of prices in a given country or region at a particular point in time.

A decline in the general level of prices in the economy.

Creeping inflation
inflation in the range of 1 to 3 percent per year

Galloping inflation

inflation in the range of 100 to 300 percent per year

Classical Economics
believes that resources and technology determine supply

Say's Law
states that supply creates its own demand.

Keynesian Economics
believes that Say's Law doesn't not hold for all costs. keynesian focuses on demand.
i.e during the Great Depression, technology and resources remained the same but the economy was still slumming.

Marginal Propensity to Consume (MPC)
slope of a line in consumption function. an estimated fraction of how much you will spend when you have an extra dollar.

Aggregate Supply
the total supply

Aggregate Demand
the total demand

inventory reduction

inventory accumulation