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111 Cards in this Set
- Front
- Back
What are the two principles of Economics?
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1. Resources will always be scarce, relative to our desires.
2. how we use those scarce resouces will shape our future. |
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What is Economics?
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Is the study of how people use scarce resources.
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What are the 3 Core Issues of the Economy?
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1. What to produce with our limited resources
2. HOW TO produce the goods and services we select 3. For WHOM goods and services are produced. |
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What does the statement "the economy is us" mean?
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It means that we produce what the economy produces and we consume what the economy consumes.
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Scarcity
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The imbalance between our desires and available resources which forces us to make economic choices.
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What are the 4 basic factors of production
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Land
Labor Capital (money) Entreprenurship |
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Land
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The 1st factor of production which not only refers to the ground but all the natural resouces
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Labor
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Refers to the skills and abilities to produce goods and services.
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Capital
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Refers to the final goods produced for use in further production of another final good
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Entrepreneur
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Is a person who sees the opportunity for new or better products and brings together the resouces needed to produce them.
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What is Opportunity Cost?
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Opportunity Cost is what you would give up in order to get what you got. What you give up in order to get something else.
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Efficiency= ?
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zero waste
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What are the 2 types of Economies?
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1. Complete Government Control
2. Laisse Faire Economy |
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Complete government Control
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The government dictates what is being produced. The people in society have no say in what is produced.
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What is the major flaw in a Complete Government Control Economy?
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The major flaw is there is no personal gain in developing anything new such as a new technology.
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Describe a Laisse Faire Economy?
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1. No one tells you what to do
2. you work for self-benefit 3. few rich and alot of poor who work for the rich 4. there is incentive to do better. |
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What is the free rider effec?
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There is an over incentive to produce private goods (to get rich) and an under incentiv to produc public goods.
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What is invisible hand?
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Its a market mechanism that makes decisions based on trends and what people want
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what percent does the U.S contribute to the worlds population?
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5%
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What percent of the worlds arable land does the U.S possess?
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12%
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What percent of the worlds output does the U.S. produce?
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20%
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What is GDP?
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Gross Domestic Product
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What is Gross Domestic Product?
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Is an indicator of how much output the average person would get if all output were divided up evenly among the population
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On Average the U.s output has grown by roughly what percent?
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3%
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The U.s output has grown how many times faster than the economy?
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three times faster
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What percent of u.s output consists of services not goods
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75%
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What percent of future jobs wll be in services?
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98% of US jobs will be in services such as healthcare, engineering, education, social services, and accounting
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America is primarily what type of economy?
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Service Economy
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4 major uses of Total output GDP or the 4 components of GDP are?
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1. consumption
2. investment 3. government services 3. Not exports |
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GDP growth > population growth
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GDP should be 3% to a population growth of 1%
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Where are the 3 places the labor force goes?
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1. To find another job
2. Entrepreneurship (New Tech) 3. Re-educate |
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Externities
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cost or a benefit born by a third party
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Income Transfer
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Some one gives money with expecting nothing back
Example would be Welfare system |
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What are the 4 failure of Market Economy?
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1.Public goods
2.Externities 3. market power (monopolies, excessive power) 4. Equity or inequity |
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What are government solutions for a failing market economy?
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1. Taxes
2. Regulations 3. Welfare, Minimum wages, social security |
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What is Market?
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Wherever an exchange takes place of either goods or services
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What are the two types of Market?
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Factor
Product |
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Factor Market
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Selling factors of production
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Product Market
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Selling final products
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Product market-to consumer-to factor market- to business firms
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See graph in notebook
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What are the 3 Goals of market Activity
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1. Utility Maximization(consumers)
2. Profit maximization (business) 3. Welfare maximization(government) |
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Supply and Demand
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Supply--Willingness and ability to sell goods at a lower price
Demand--Willingness and ability to get that good and product |
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When does a demand exist?
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A demand exists as long as someone is willing and able to pay for the good
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What is Demand?
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Is the ability and willingness to buy specific quantities of a good at alternative prices in a given time period
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What is Opportunity Costs?
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Is the most desired good or services that are forgone(forfeited) in order to obtain something else
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What is Demand Schedule
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Is a table showing the quantities of a good a consumer is willing and able to buy at alternative prices in a given time
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What else is Demand Schedule
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A demand schedule is an expression of consumer buying intentions of a willingness to buy, not a statement of actual purchases
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What is Demand Curve?
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IS a curve describing the quantities of a good a consumer is willing and able to buy at alternative prices in a given time period
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What is Law of Demand?
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Is the quantity of a good demanded in a given time period increases as its price falls
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What are the Determinants of Market Demand?
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1. Tastes(desires for this and other goods)
2. Income(of the consumer) 3. Other goals(their availability and prices) 4. Expectations(for income, prices and tastes. |
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What are compliments?
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Goods that are used with eachother. Example--chips and dip.
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What are substitues?
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Good that are viewed as equal. Examples--Coke vs Pepsi
Or Orange Crush vs Orange Soda Maxwell Coffee vs Folgers |
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What are Substitute Goods?
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Are goods that substitute for eachother when the price of one good rises, the demand for the other increases. Examples Coke vs Pepsi
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What are Complementary Goods?
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Are goods frequently consumed in combination when the price of Good X rises and the demand for Good Y falls.
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Ceteris Paribus?
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Is the assumption of nothing else changing.
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What is the purpose of a demand curve?
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The demand curve shows us how changes in market prices alter consumer behavior
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How long is demand curve valid?
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Only as long as underlying determinants of demand remain constant. As long as people still like the product
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Do the determinants of demand change?
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Yes, they can change over time if a better product is produced or is produced at a cheaper price
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Which way does the demand curve shift when income goes up?
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The demand curve shifts to the right
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An increase in taste shifts the demand curves which way?
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To the right
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There are sometimes movements along the demand curve, what does this show?
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This shows a response to price changes for the goods
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The demand curve will shift when?
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Determinants of the demand (product) changes
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What is Changes of Quantity Demand?
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Quantity demanded will change in response to price changes for that good
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What is changes in Demand?
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Changes in Demand will change due to changes in tastes, income, or expectations
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What is Market Demand?
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Market Demand is the total quantity of a good or service peopl are willng and able to buy at alternative prices in a given time period; the sum of individual demands
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What is Market Supply?
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Is the total quantity of a good that sellers are willing and able to sell at a alternative prices in a given time period
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What are the Determinants of Market Supply?
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1. Technology
2. Factor costs 3. other goods 4. taxes and subsidies 5. expectations 6. # of sellers |
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What is the Law of Supply?
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1.The quantity of a good supplied in a given time period increases as its price increases.
2. On the supply side, the law says that larger quantities will be offered for sale at higher prices 3. Supply curves are upward sloping to the right 4. |
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What is Market Supply?
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Market supply is an expression of a sellers intentions-an offer to sell, not a statement of actual sales
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Movements along a supply curve show what?
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Changes in quantity supplied
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Shifts of a supply curve show what?
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Changes in supply
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Equilibrium price?
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price at which the quantity of a good demanded in a given time period equals the quantity supplied
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Market Mechanism?
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Use of market prices and sales to signal desired outputs.
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Market Surplus?
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The amound by which the quantity supplied exceeds the quantity demanded at a given price;excess supply
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What is Market Mechanism?
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The use of market prices and sales to signal desired outputs
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What is Market Surplus?
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The amount by which the quantity supplied exceeds the quantity demanded at a given price;excess supply
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What is Market Shortage?
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Athe amount by which the quantity demanded exceeds the quantity supplied at a given price;excess demand
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When the market price is set above or below the equilibrium price what happens?
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Either a market surplus or market shortage will emerge
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When will the equilibrium price change?
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Whenever the supply or demand curve shifts
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When supply decreases what happens to price?
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Price rises
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Price Ceiling
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Upper limit imposed on the price of a good
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When will price ceiling change?
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When a determinant of supply changes
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What are th 4 determinants of Supply?
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Factor cost
Technology Taxes/Subsidies Expectation |
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What is Liquidating?
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Taking a product lowering the price so you can turn a product into money
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QD>QS=?
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Shortage
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utility
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The pleasure of satisfaction obtained from a good or service
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Total Utility
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The amount of satisfaction obtained from entire consumption of a product
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Marginal Utility
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Change in total utility obtained by consuming one additional unit of a good or service
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inelastic
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Not price sensitive
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elastic
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Price Sensitive
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Elasticity less than 1 is ?
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inelastic
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Elasticity more than 1 is ?
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elastic
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e=% change QD
________________ % change P |
Elasticity equals percent change of Quality Demand divided by percent Change of Price
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Revenue=?
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Total Revenue=Price x Quantity
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Unemployment
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Someone who doesnt' have ajob and who is activity seeking ajob
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What are the 4 types of employment
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Seasonal
Frictional structural cyclical |
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What is seasonal employment
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when worker work certain months of the year and declare unemployment for remainder of months
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What is frictional employment
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choosing to leave your job to seek another job, you can't collect unemployment
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What is structural employment
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Skills were no longer needed (being fired)
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What is cyclical employment
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There is not enough jobs to meet the demand of the economy at the time
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When do busines cycles shift?
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From shifts of the aggregrate supply and demand curves
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Macro Economics?
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Deals will controversies the focus on the shape of aggregrate supply and demand curves and the potential shift to them
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What did Keynes conclude?
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Keynes concluded that inadequate aggregrate demand would cause persistently high unemployment
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What would excessive aggregrate demand cause?
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inflation
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What do Keynesian and Monetariest Theories emphasize?
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The potential of aggregrate demand shifts to alter some macro outcomes
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Aggregrate demand shifts affect price but not what in the long run?
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output
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What way is short run aggregrate supply curve sloping
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likely to be upward sloping
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What are 3 Distinct macro policy strategies?
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1. shifts the aggregrate demad curve
2. shifts the aggregrate supply curve 3. Laisse Faire |
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What is fiscal policy?
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The use of government taxes and spending to alter macroeconomics outcomes
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What is monetary policy?
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The use of money and credit controls to influence macro enconomies outcomes
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What is supply-side policy?
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use of tax incentitves, regulation, and other mechanisms to increase the ability and willingness to produce goods and services.
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