econn
Terms
undefined, object
copy deck
- Labor (factor of production)
- workforce; people's effort, abilities, and skills
- Government regulations
- when the government establishes new regulations production can be affected
- Market equilibrium
- a situation in which prices are relatively stable, and the quantity of goods or services supplied is equal to the quantity demanded
- Competition
- the struggle among sellers to attract consumers while lowering costs
- Inflation
- a rise in the general price level
- Price Ceiling
- a maximum legal price that can be charged for a product
- scarcity
- is the condition that results from society not having enough resources to produce all the things people would like to have (fundamental economic problem).
- Cyclical Unemployment
- unemployment directly related to swings in the business cycles (jobs lost during recessions and jobs gained during expansion)
- Four Factors of production
- Land, Labor, Capital, Entrepreneurs
- Elastic
- a given change in price causes a relatively larger change in quantity demanded
- Equitable Taxes
- must be fair
- Market Economy
- people and companies act in their own interest to decide what, how, and form whom to produce; produces respond to the decisions that consumers make
- Law of Supply
- Suppliers will offer more for sale at higher prices and less for sale at lower prices
- Marginal Utility
- the extra usefulness or satisfaction that a person gets from acquiring ONE additional unit of a product
- Profit Motive
- the driving force that encourages people and orginizations to improve their material well-being-is largely responsible for the growth of a free enterprise system based on capitalism
- Stagflation
- a period of stagnant growth combined with inflation
- Shortage
- a situation in which the quantity demanded is greater than the quantity supplied at a given price
- Capital (factor of production)
- tools, equipment, machinery, factories, money
- Land (factor of production)
- natural resources, not created by humans
- Efficient Taxes
- easy to collect
- Want
- a way of expressing a need
- Economic Security
- Job security; security of investments and savings
- Full Employment
- Lowest possible unemployment rate when economy is growing; if unemployment is less than 4.5% it's considered full employment
- Surplus
- a situation in which the quantity supplied is greater than the quantity demanded at a given price
- Laissez-faire Economic Theory
- philosophy that government should not interfere w/ commerce or trade. Government's role is limited to protecting private property, enforcing contracts, settling disputes, and protecting businesses from increased competition from foreign goods
- Complements
- related goods (ex: DVD to a DVD player)
- What causes shifts in the supply curve?
- cost of inputs, productivity, technology, taxes and subsidies, expectations, government regulations, and number of sellers
- Economies of Scale
- a situation in which the average cost of production falls as the firm gets larger
- Diminishing Marginal Utility
- the extra satisfaction we get from one additional unit of a product begins to diminish
- Positive Externality
- a benefit received by someone who had nothing to do with the activity that generated the benefit
- Law of Demand
- states that the quantity of a demanded good or service varies inversely with its price (price goes up, demand goes down // price goes down, demand goes up)
- Individual Income Tax
- made by the 16th amendment in 1913; the tax on people's earnings
- Need
- a basic requirement for survival; includes food, clothing, and shelter
- Supply Schedule
- A listing of the various quantities of a particular product supplied at all possible prices in the market
- Incidence of Tax
- the final burden of the tax
- Example of a Price Floor
- Minimum wage
- Expectations
- if producers think the price of their product will go up, they may withhold some of their supply
- Demand curve
- a graph showing the quantity demanded at each and every price that might prevail in te market
- Microeconomics
- is the area of economis that deals with behavior and decision making by small units, such as individuals and firms
- GDP gap
- the difference between the actual GDP and the potential GDP that could be produced if all resources were fully employed.
- Economic System
- an organized way of providing for the wants and needs of people; every society has one
- Technological Unemployment
- unemployment that is caused by workers being replaced by machines
- Cost-benefit analysis (also see wksht.)
- a way of thinking about a problem that compares the costs of an action to the benefits received
- Simple Taxes
- laws should be written so taxpayers can understand them
- Negative Externality
- the harm, cost, or inconvenience suffered by a third party because of actions by others
- Supply Curve
- a graph showing the various quantities supplied at each and every price that might prevail in the market
- Criteria for effective taxes (3)
- Equity, Simplicity, and Efficiency
- Utility
- the capacity to be useful and provide satisfaction; something must have utility to have value
- Economic Growth
- overall growth in the economy is good for all economic goals
- Price Floor
- the lowest legal price that can be paid for a good or service
- Consumer Price Index
- reports on price changes for about 80,000 items in 364 categories
- Traditional Economy
- The allocation of scarce resources and all economic activities stem from rituals and customs; ex: inuit of canada
- Example of a Price Ceiling
- rent controls on apartments in New York or organs= price ceiling of $0
- Rationing
- the government decides everybody's "fair share"
- Price
- the monetary value of a product as established by supply and demand
- Full Employment
- 95% of people who are currently looking for a job are in the workforce
- Three major types of economic systems
- Traditional Economy, Command Economy, Market Economy
- Ability to Pay Principle
- people should be taxed according to their ability to pay, regardless of benefits received
- Oligopoly
- a few large sellers dominate the market
- 7 Economic and Social Goals
- Freedom, Efficiency, Equity, Security, Full Employment, Price Stability, Economic Growth
- Economic Freedom
- freedom to choose
- Substitutes
- products that can be used in place of other products
- Economics
- the study of how people satisfy wants w/ scarce resources
- Entrepreneurs (factor of production)
- a risk-taker in search of profits who does something new with existing resources; risk-takers who combine the land, labor, and capital into new products
- Economic Equity
- equal pay for work; fairness in hiring
- Command Economy
- one central authority makes most economic decisions; people have little resources; government decides what, how, and for whom to produce
- Cost of Inputs
- supply might increase because of decrease in cost of inputs
- Externality
- unintended side effect that either benefits or harms a third party not involved in the activity that it caused
- Paradox of value
- the fact that some necessary goods (like water) have little monetary value and some non-necessities (like diamonds) have great value
- Supply
- the amount of a product that would be offered for sale at all possible prices that could prevail in the market
- Unemployment (5 kinds)
- Frictional, Structural, Cyclical, Seasonal, Technological
- Frictional Unemployment
- Those who are between jobs (looking for work, new to the workforce, temporary)
- Economic Efficiency
- the factors of production must be used wisely
- Benefit Principle
- those who benefit from government services should pay in proportion to the benefits they receive
- GDP (gross domestic product)
- the $ amount of all final goods and services produced within a country's borders in a 12 month time period
- Profit
- the extent to which persons or organizations are better off at the end of a period than they were at the beginning
- Seasonal Unemployment
- unemployment that results from changes in the weather or seasons
- Taxes and subsidies
- if the producers inventory is taxed production cost goes up // subsidies make production cost go down
- Structural Unemployment
- unemployment caused by a fundamental change in the economy or a change in consumer tastes reduces a demand for a certain occupation
- Monopoly
- only one seller of a particular product
- Inelastic
- a given change in price causes a relatively smaller change in the quantity demanded
- Price Stability
- No sudden increase or decrease in the overall price of goods
- Production Possibilities Frontier
- a diagram representing various combinations of goods and/or services an economy can produce when all productive resources are fully employed
- Productivity
- when management motivates its workers this increases
- Technology
- technology increases productivity
- Two principles of taxation
- Benefit Principle and Ability to Pay Principle