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111 Cards in this Set

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