Unit 3 Key Terms

Question 1

the quantity of a good or service that consumers are both willing and able to buy at various prices

Answer 1

Demand

Question 2

an economic law stating that as the price of a good or service increases, the quantity demanded decreases, and vice versa

Answer 2

Law of Demand

Question 3

a product that satisfies the same basic want as another product

Answer 3

Substitute Goods

Question 4

a product that is used or consumed jointly with another product; tennis rackets and tennis balls are one example

Answer 4

Complementary Goods

Question 5

the quantity of a good or service that producers are willing and able to offer for sale at various prices

Answer 5

Supply

Question 6

an economic law stating that as the price of a good or service increases, the quantity supplied increases, and vice versa

Answer 6

Law of Supply

Question 7

the amount of money a firm receives in the course of doing business

Answer 7

Revenue

Question 8

a measure of the degree to which the quantity demanded or supplied of a good or service changes in response to a change in price

Answer 8

Elasticity

Question 9

the point at which the quantity of a product demanded by consumers in a market equals the quantity supplied by producers

Answer 9

Market Equilibrium

Question 10

the price at which the quantity of a product demanded by consumers equals the quantity supplied by producers

Answer 10

Equilibrium Price

Question 11

the quantity of a good or service demanded by consumers and supplied by producers when the market is in equilibrium

Answer 11

Equilibrium Quantity

Question 12

government-imposed limits on the prices that producers may charge in the market

Answer 12

Price Controls

Question 13

a minimum price set by the government to prevent prices from going too low

Answer 13

Price Floor

Question 14

a maximum price set by the government to prevent prices from going too high

Answer 14

Price Ceiling

Question 15

the controlled distribution of a limited supply of a good or service

Answer 15

Rationing

Question 16

an illegal market in which goods are traded at prices or in quantities higher than those set by law

Answer 16

Black Market

Question 17

the organization of a market, based mainly on the degree of competition; there are four basic market structures: perfect competition, monopolistic competition, oligopoly, and monopoly

Answer 17

Market Structure

Question 18

a market structure in which many producers supply an identical product and no single producer can influence its price; in such a market, prices are set by supply and demand

Answer 18

Perfect Competition

Question 19

a market structure in which a single producer supplies a unique product that has no close substitutes

Answer 19

Monopoly

Question 20

a market structure in which a few firms dominate the market and produce similar or identical goods

Answer 20

Oligopoly

Question 21

a market structure in which many producers supply similar but varied products

Answer 21

Monopolistic Competition

Question 22

a situation in which the market fails to allocate resources efficiently

Answer 22

Market Failure

Question 23

a cost or benefit that arises from production or consumption of a good or service that falls on someone other than the producer or consumer; a spillover or side effect of production or consumption

Answer 23

Externality

Question 24

goods and services that are used collectively and that no one can be excluded from using; public goods are not provided by markets

Answer 24

Public Goods

Question 25

a business whose main purpose is to receive deposits and make loans

Answer 25

Bank

Question 26

anything owned to which a market value can be assigned

Answer 26

Assets

Question 27

a card authorizing the user to buy goods and services with funds borrowed from the bank, store, or other business that issued the card

Answer 27

Credit Card

Question 28

a card authorizing the user to access his or her own funds on deposit in a bank account; a debit card can be used to buy goods and services or to withdraw money directly from an account

Answer 28

Debit Card

Question 29

setting aside a portion of income for use in the future

Answer 29

Saving

Question 30

a periodic payment for the use of borrowed funds; interest is paid on a loan

Answer 30

Interest

Question 31

the amount of money borrowed, or the amount of money still owed on a loan, apart from the interest

Answer 31

Principal

Question 32

using money with the intention of making a financial gain

Answer 32

Investing

Question 33

a method of lowering risk by investing in a wide variety of financial assets

Answer 33

Diversification

Question 34

a business owned and managed by one person

Answer 34

Sole Proprietorship

Question 35

the legal responsibility to repay debts and to pay for damages resulting from a lawsuit

Answer 35

Liability

Question 36

a business owned by two or more co-owners who share profits from the business and are legally responsible for the business’s debts

Answer 36

Partnership

Question 37

a business owned by shareholders who have limited liability for the firm’s debt

Answer 37

Corporation

Question 38

a corporation that does business in more than one country

Answer 38

Multinational Corporation

Question 39

an arrangement in which a parent company, or franchiser, distributes its products or services through independently owned outlets

Answer 39

Business Franchise

Question 40

a business organization that is jointly owned and operated by a group of individuals for their mutual benefit

Answer 40

Cooperative

Question 41

an organization that functions much like a business but does not operate to make a profit; nonprofit organizations focus on public or private goals, such as the promotion of human rights, environmental preservation, or medical research

Answer 41

Nonprofit Organization

Question 42

the portion of the population that has paid work or is seeking work; the labor force does not include active members of the military

Answer 42

Labor Force

Question 43

relocating work and jobs to another country; the opposite of inshoring

Answer 43

Offshoring

Question 44

the rate of pay that results in neither a surplus nor a shortage of labor; a wage rate that is too high will attract too many workers, whereas a rate that is too low will attract too few

Answer 44

Equilibrium Wage

Question 45

nonwage compensations offered to workers in addition to pay; examples include health care and vacation benefits

Answer 45

Fringe Benefits

Question 46

a difference in the wages earned by various groups in society, such as between men and women or between white Americans and black Americans

Answer 46

Wage Gap

Question 47

policies designed to promote the hiring of individuals from groups that have historically faced job discrimination

Answer 47

Affirmative Action

Question 48

negotiations between an employer and a group of employees, usually represented by a labor union, to determine the conditions of employment

Answer 48

Collective Bargaining

Question 49

a law that prohibits employers from making union membership a requirement for getting or keeping a job

Answer 49

Right-to-work Law