Teachers' Glossary of Economic Terms

Capital resources

"Capital resources," often called capital goods, refers to goods used to produce other goods and services. Capital resources may be buildings, equipment, machinery, tools, ports, and dams, provided that those items are used to produce goods and services.

Common good

"Common good" refers to some program or action that is of benefit to society as a whole. Laws to set up parks, public schools, and public libraries are passed to promote the common good.

Consumer

"Consumers" are people who buy goods and services to satisfy their wants.

Consumption

"Consumption" may be defined as the use of goods and services by consumers, businesses, or governments.

Demand

"Demand" refers to the different quantities of resource, good, or service that will be purchased at various prices during a given period of time. According to the law of demand, the lower the price of a good or service, the more of it will be purchased, whereas the higher the price, the less of it that will be purchased.

Factors of production

"Factors of production" are the inputs into the production process: land (natural resources), labor (human resources), and capital. "Human resources" and "capital resources" are defined elsewhere in the glossary.

Human resources

"Human resources" refers to the quantity and quality of human effort directed to the production of goods and services. One type of human resource is an entrepreneur. An entrepreneur is a person who assumes the risk of organizing productive resources to produce goods and services.

Investment

"Investment" refers to the use of resources by businesses, individuals, or government to increase productive capacity by developing new technology, obtaining new capital resources, or improving the skills of the work force. Examples are as follows: A restaurant buys new stoves in which to bake bread; an individual buys tools to make some repairs; and a school buys new computers and textbooks.

Opportunity cost

"Opportunity cost" is the most important alternative that is given up as a result of a specific economic decision. The opportunity cost of purchasing an automobile for an eighteen-year-old boy may be that he cannot afford to attend college.

Private goods

"Private goods" may be defined as those goods that producers can withhold from consumers who refuse to pay for them, where the consumption of the product or service by one person reduces its usefulness to others. One example is a hamburger. See also "public goods."

Producers

"Producers" are people who combine resources to make goods and services.

Production

"Production" refers to the activity of combining resources to make goods and services.

Public goods

"Public goods" are goods or services that cannot be withheld from customers who refuse to pay for them (nonexclusion), where the consumption of products or services by one person does not reduce its usefulness to others. Examples include national defense, street lighting, flood control, public safety, and fire protection in a crowded neighborhood. See also "private goods."

Saving

"Saving" may be defined as a decision to withhold a portion of current income from consumption. Saving from the individual's point of view represents income not spent, which may be placed in savings deposits in banks, making it possible for those banks to make loans to those who wish to buy capital goods or other services.

Scarcity

"Scarcity" is a term referring to the condition where people cannot have all the goods and services that they want. It results from the imbalance between the relatively unlimited wants and limited resources. Scarcity is found in all societies.

Supply

"Supply" refers to the different quantities of a resource, good, or service that will be offered for sale at various possible prices during a specified time period. According to the law of supply, the higher the price of an item, the more of it that is likely to be offered for sale.

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