Economic Terms Civics Supply and Demand: Supply represents how much the market can offer, including how much a producer is willing to produce at a certain price. Demand refers to how much of a product or service is desired by buyers. Scarcity: the basic economic problem that arises when there is little or low supply of something and happens because people have unlimited wants but resources (resources are all things people use to make goods/products) are limited. Want vs. Need: A want is something that is desired and it is said that every person has unlimited wants. A need is something that is necessary for survival such as food and shelter. Opportunity Cost (Risk) vs. Cost Benefit: Opportunity cost is when a choice between two options must be made; example: cost of going to college is the money you would have earned if you worked instead. Cost benefit estimates the strengths and weaknesses of alternatives that satisfy a want/need. Factors of Production: things that are used to create finished goods/products such as an iPod. There are four basic factors: land (natural resources), labor (work that people put into creating the product), capital (money or equipment and machinery used to produce a good) and entrepreneurship (advertising the product). Consumer vs. Producer: A consumer is the one who pays to use goods and service. A producer is the one who creates goods and service that others want. Resources (natural, man-made and non-renewable): All materials, energy, services, staff, knowledge, or other items used to create goods and service that people want or need. Non-renewable means it cannot be replenished once it is used such as coal or petroleum. Free vs. Command vs. Traditional Markets: In a free market, producers get to choose what they want to make and the prices for goods/services are set freely by how much people are willing to pay. In a command market, producers are told what to create by the government the prices for goods/services are set by the government. In a traditional market, people trade and negotiate for what they want and need.