Demideca Economics
Terms
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- People have limited wants or limited resources?
- limited resources
- people are forced to decide to forgo one or more of their what?
- wants
- economics
- study of decision making
- microeconomics
- the study of economics on individual levels. households, firms, specific regions of a country
- macroeconomics
- the study of economics on large-scale levels, national and international issues, government policies
- scarcity
- not having the resources to satisfy all wants
- opportunity cost
- the value of the next best thing you would have done, but didn't do
- tradeoff
- the act of giving something up to get something else
- factors of production
- resources used to produce GDP
- 4 types of resources
- land, capital, labor, entrepeneurial
- land
- natural resources
- capital
- premade goods, money, buildings, ect
- labor
- physical labor
- entreprenurial
- thought needed to organize other 3 factors
- possibilities frontier plots what?
- it plots the possible levels of two different goods
- benefit-cost analysis
- a part of the decision making process in which you weigh the benefits of the alternatives against their costs
- margin
- the difference of a small incremental increas, the difference of doing one more thing
- marginal benefit
- the benefit of an incremental change
- marginal cost
- the cost of an incremental change
- utility
- the satisfaction gained from an incremental change
- marginal utility
- the satisfaction gained from an incremental change
- total utility
- the total satisfaction gained from doing or consuming something, however much of it, can be positive or negative
- positive economics
- economics of fact
- normative economics
- economics of opinion
- optimization
- the act of maximizing total utility
- free market
- an economic system in which allocation occurs naturally by market forces
- command
- economic system in which a central authority makes all economic decisions
- laissez-faire
- meaning "hands off," the notion that government should interfere w/ economy
- absolute advantage
- when one country is able to produce more of a good than another country
- comparative advantage
- when one country has a lower opportunity cost of producing a good than another country
- imports
- goods that a country's consumers purchase from another country's producers
- exports
- goods that a country's produces sell to another country's consumers
- net exports
- exports minus imports, positive net exports are called a trade surplus, and negative are trade deficit
- price
- the amount in exchange for which sellers give buys a good or service
- quantity supplied
- the total amount of goods and services that, at a given price level, producers will be willing to sell
- supply
- the relationship between price and quantity supplied by producers
- demand
- the relationship between the price and the quantity demanded by the consumers
- law of supply
- as price increases,producers will supply greater quantities of goods and services
- law of demand
- as price increases, the quantity demanded by consumers will decrease
- demand(supply) schedule
- a table showing quantity demand (quantity supplied) at various prices, basically just the demand (supply) curve in tabular form
- price elasticity of demand
- a measurement of the sensitivity of quantity demanded to a change in the price of the good or service
- cross-price elasticity
- a measurement of the sensitivity of quantity demanded of one good to a change in the price of another good
- complements (substitutes)
- related goods, when the price of one good falls, demand for the other rises (falls)
- income elasticity of demand
- a measurement of the sensitivty of quantity demanded to income
- normal (inferior) good
- a good whose demand increase (decreases) as income of its consumer increases
- firm
- an organization that prducers a good for sale on the market
- competition
- producer's struggle against each other to make profits, generally resulting in lower prices and incentives for better products and efficency
- monopoly
- a market that has only obne producer
- natural monopoly
- a special kind of monopoly, which arises in industries where costs are such that two producers cannot both exist and be profitable, often allowed by regulted by the government
- oligopoly
- a market that has only a few producers
- monopolistic competition
- a market structure with numerous producers who each aim differentiate their product, hoping to obtain a small amount of monopoly power
- perfect competition
- a market that has many producers and consumers and is driven by straightforward supply and demand
- interest
- the cost of borrowing money
- premium
- the periodic fee paid to a contractual savings institution ( such as an insurance company) in exchange for its service
- labor union
- a group of laborers who work in the same trade (such as carpentry)
- trade union
- a union of laborers who work in the same industry (such as auto manufacture)
- craft union
- a union of workers who share a common skill (such as medicine or law)
- due process
- a legal doctrine, which insures that individuals will be treated fairly by the law
- patent
- government protection of an individual's right to design/development of technology or ideas
- copyright
- government protection of an individual's right to intellectual property, used for books, movies, music, ect
- circular flow
- firms purchase the labor and productivity of workers in the resource market who in turn purchase the goods produced by the firms in the product market, thus, for the entire economy, outputxprice level=total income
- aggregate demand
- demand cure for an entire economy relates overall price level and total output
- aggregate supply
- supply curver for an entire economy,relates overall price level and total output
- business cycle
- the tendency of economies to alternate through periods of strong growth and slowdown, between peaks and troughs
- expansion
- a period of growth in the economic cycle, opposite of contraction
- recession
- officially a period of declining output, lasting 2 or more quarters (6 months)
- depression
- a long severe recession in which unemployment is very severe
- output
- the total quantity of goods produced by country
- gross domestic product
- the sum of all production within a country's borders, equal to either the sum of everyone's income or the sum of all output multiplied by its price
- gross national product
- the sum of all produced by the population of a country
- net foreign facotr income
- the difference between GDP and GNP
- GDP per capita
- GDP divided by population, a common measuring stick for a nation's standard of living
- depreciation
- deteriorization and decreasing value of capital goods over time
- net domestic product
- GDP minus the cost of depreciation
- national income
- net domestic product minus indirect business taxes plus foreign factor income
- umemployment
- the condition where an adulet is able and willing to work but doesn't not have a job, someone who has not look for work for a period of more than 4 weeks is not counted as umemployed, but as discouraged
- frictional unemployment
- "normal unemployment" caused by people moving inbetween jobs, always existes in some quantity
- structural unemployment
- unemployment caused by the skill set of the work force not matching the skills need by producers
- cyclical unemployment
- unemployment caused by ups and downs of the business cycle ex, a layoff due to recession
- seasonal unemployment
- unemployment caused by a very predictable change of season ex a ski instructor out of work during the summer
- natural unemployment
- a small rate of unemployment corresponding to natural movement of people between jobs
- full employment
- will unemployment in natural
- discouraged worker
- a person who is neither employed nor seeking new work, does not count in the official unemployment"figure
- labor force
- includes all civilians over age 16 who are employed or defined as unemployed
- fiscal policy
- the use of government spending and legislative/executive policies to manipulate the economy
- budget surplus/deficit
- the amount by which government spending fell short of/exceeded government income in a year
- balance budget
- when government spending must equal the budget , exists in many states but not on the national level
- national debt
- the amount of money the government owes due to borrowing
- employment act of 1946
- gave the government full responsibilty to mainataion full employment
- humphrey hawkins act of 1978
- provided many more economic targets for the government, including price stability and balanced budgets
- automatic stabilizer
- policy mechanism that, by design provides stimulation to the economy when it is slowing down and slows the economy down when it's expanding, an example is unemployment insurance (which raises government spending whent the economy is bad)
- Marginal propensity to consume
- the fractional income which people will spend on consumption, also known as MPS (save)
- government spending multiplier
- 1/(1-MPC) the effects of government spending are multiplied by this amount
- tax multiplier
- MPC/(1-MPC)the effects of the tax cuts are multiplied by this amount
- progressive (regressive) tax
- taxes richer (poorer) people at a higher percentage than poorer (richer) people
- flat tax
- taxes everyone by the same percentage
- corporate tax
- income from corporations is taxed twice, profits are taxed and dividends are taxed when the shareholders get them
- supplyside economics
- policies favored in the 1980s by which tax cuts are given to producers and the benefits eventually "trickle down"to everyone
- crowding out
- the fact that government spending tends to increase intereset rates causing a decrease in private investment and possibly canceling out the positive effect that government spending had on GDP
- barter
- exchange of goods and services without money
- money
-
any item that fullfills the following:
1. unit of account, measures how much purchasing power you have
2. store of value can be kept for purchases in the future
3. medium of exchange everyone is happy to accept and use it - money supply
-
the amount of money in the economy. there are several groupsing of money which vary in liquidity ( or how easily they can used for transaction)
M1=currency and checking accounts
M2=includes M1 and adds savings deposits and time deposits
M3, M4, ect. include M2 and more - gold standard
- the government practice of defining the value of currency in terms of gold and backing it up w/ gold deposit