Glossary Terms:

It's a Matter of Power

Glossary terms from:


One of many choices or courses of action that might be taken in a given situation.


Monetary or non-monetary gain received because of an action taken or a decision made.


Any activity or organization that produces or exchanges goods or services for a profit.


In the context of credit transactions, capacity is one of the Three Cs of Credit. It is an indicator of how creditworthy a prospective borrower is likely to be, as determined by the borrower's current and future earnings relative to current debt. High earnings and low debt, for example, indicate a strong capacity to make payments on the loan in question.


Decision made or course of action taken when faced with a set of alternatives.


People who use goods and services to satisfy their personal needs and not for resale or in the production of other goods and services.


A legal entity owned by shareholders whose liability for the firm's losses is limited to the value of the stock they own.


An amount that must be paid or spent to buy or obtain something. The effort, loss or sacrifice necessary to achieve or obtain something.


A conclusion reached after considering alternatives and their results.


Economic units that demand productive resources from households and supply goods and services to households and government agencies.


Something a person or organization plans to achieve in the future; an aim or desired result.


Tangible objects that satisfy economic wants.


Any reward or benefit, such as money, advantage or good feeling, that motivates people to do something.


The purchase of capital goods (including machinery, technology or new buildings) that are used to produce goods and services. In personal finance, the amount of money invested in stocks, bonds, mutual funds and other investment instruments.


The quantity and quality of human effort available to produce goods and services.

Long Run

A period of time long enough for firms to change the quantities of all the resources they use; the exact amount of time varies depending on the industry.

Market Economy

An economy that relies on a system of interdependent market prices to allocate goods, services, and productive resources and to coordinate the diverse plans of consumers and producers, all of them pursuing their own self-interest.

Opportunity Cost

The second-best alternative (or the value of that alternative) that must be given up when scarce resources are used for one purpose instead of another.


The amount of money that people pay when they buy a good or service; the amount they receive when they sell a good or service.


People and firms that use resources to make goods and services.


A good or service that can be used to satisfy a want.


A process of manufacturing, growing, designing, or otherwise using productive resources to create goods or services used to to satisfy a want.


Income received for entrepreneurial skills and risk taking, calculated by subtracting all of a firm's explicit and implicit costs from its total revenues.

Profit Motive

The desire to make money which motivates or causes people to work hard to produce goods and services.


The basic kinds of resources used to produce goods and services: land or natural resources, human resources (including labor and entrepreneurship), and capital.


The money a business receives from customers who buy its goods and services. Not to be confused with profit.


The chance of losing money.


The situation that results when the quantity demanded for a product exceeds the quantity supplied. Generally happens because the price of the product is below the market equilibrium price.


The amount of a good or service that producers are willing and able to offer for sale at each possible price during a given period of time. Normally, as the price of a good or service rises (or falls), the quantity supplied of the good or service rises (or falls).


An abstract measure of the satisfaction consumers derive from consuming goods and services.


People employed to do work, producing goods and services.