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105 Cards in this Set

  • Front
  • Back
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 we use to produce goods and services, we divid these into four basic categories
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
quantity demanded
the total amount of goods and services that, at a given price level, consumers would be willing to buy
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
factors of production
resources used to produce GDP
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