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65 Cards in this Set
- Front
- Back
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Scarcity |
The condition that results because people have limited resources but unlimited wants |
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Incentives |
Something that motivates a person to take a particular course of action |
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Opportunity cost |
The value of the next best alternative that is given up when making a choice; a measure of what you must give up to get what you want. |
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Law of Diminishing Marginal utility |
The general observation that as a quantity of a good or service consumed increases the benefits for the consumer of each additional unit decreases. |
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Tradeoffs |
The exchange of one benefit or advantage for another that is thought to be better |
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Marginal Utility |
The extra satisfaction or pleasure achieved from an increase of one additional unit of a good or service. |
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Factors of Production |
The resources used to produce goods and services; defined as land, labor or capital. |
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Human Capital |
The knowledge and skill people gain from education and on the job training, and other experiences |
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3 Economic questions |
•What goods and services are to be produced? •How are goods and services to be produced? •For whom are goods and services to be produced? |
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Characteristics of a free enterprise system |
•Economic Freedom •Economic Efficiency •Economic Equity •Economic Growth •Economic Security •Economic Stability |
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Characteristics of Command Economies |
•Accumulate wealth and goods for the ruling class while preserving economic stability. |
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Mixed Economy |
•An economic system in which both the government an individual's play important roles in production and consumption most modern economies are mixed economies |
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Traditional Economies |
•An economic system in which decisions about production and consumption are based on custom and tradition |
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Income distribution |
A policy designed to reduce income inequality by taking money from the rich and distributing it to the poor |
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Absolute Advantage |
•The condition that exists when someone can produce a good or service using fewer resources than someone else |
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Comparative Advantage |
•The condition that exists when someone can produce a good or service at a lower opportunity cost than someone else |
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Specialization |
The development of skills or knowledge in one aspect of the job or field of interest |
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Economic Interdependence |
Characteristics of a society in which people rely on others for most of the goods and services they want |
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Globalization |
Process by which people and Economies around the world are becoming increasingly interconnected |
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Ways trade makes us wealthier |
•It puts goods in the hands of those who value them. •It increases the quantity and variety of goods •It lowers the cost of goods |
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Ways global trade doesn't help everyone |
•Cheap imports from countries with a comparative advantage may take business away from American producers and even force them out of business |
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Division of Labor |
•The allocation of separate tasks to different people based on principle of specialization |
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Law of Demand |
An economic law stating that the price of a good or service increases, the quantity demanded decreases and vice versa. |
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What constitutes demand? |
•Willingness & ability to buy |
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Law of Demand |
An economic law stating that as a price of a good or service increases, the quantity demanded decreases, and vice versa |
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Factors causing demand curve to shift |
•Changes in income •Changes in number of consumers •Changes in consumers tastes & preference •Changes in consumer expectations •Changes in price of substitute goods •Changes in the price of complementary goods |
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Elasticity of Demand |
A measure of the sensitivity of consumers to a change in price |
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Elasticity of Supply |
A measure of the sensitivity of producers to a change in price |
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Factors that cause supply curve to shift |
•change in supply •changes in the cost of input •Changes in number of producers •Changes in conditions due to natural disasters or international events •Changes in Producers expectations •Changes in government policy |
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Equilibrium |
Quantity supplied equals quantity demanded |
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Shortage |
•a lack of something that is desired |
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Surplus |
More than what is needed or used |
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Market clearing price |
The price at which the quantity demanded of a product equals the quantity supplied; another term for equilibrium price |
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Price ceiling |
A maximum price set by the government to prevent prices from going too high |
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Price Floor |
A minimum price set by the government to prevent prices from going to low |
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Barter economy |
The direct exchange of goods or services without the use of money |
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Money |
A generally accepted medium of exchange that can be traded for goods and services or used to pay debts |
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Functions of money |
•Medium of exchange Standard of value Purchasing power |
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Characteristics of money |
•Acceptability •Scarcity •Portability •Durability •Divisibility •Uniformity |
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Functions of banks |
serve as financial intermediary- an institution that brings together sellers and buyers in financial markets. |
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Responsibilities of the FED |
•Manage banking system •Control the nations money supply •Issues currency |
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Rule of 72 |
A method of calculating how long it will take to double the value of an investment. |
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Liquidity |
The ease at which assets can be converted into cash |
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Diversification |
A method of lowering risk by investing in a wide variety of financial assets |
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Reasons credit cards are not money |
Credit cards are borrowed money |
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Who is not part of the labor force? |
•Unpaid workers •Active members of the military •Prision inmates |
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Offshoring |
Relocating work and jobs to another country; the opposite of inshoring. |
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Outsourcing |
A business practice in which work that was once done within a company is sent to outside contractors |
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Inshoring |
The process of bringing work and jobs into a country; the opposite of offshoreing |
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Fringe Benefits |
Non wage compensation offered to workers in addition to pay; examples include health care and vacation benefits |
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Fringe Benefits |
Non wage compensation offered to workers in addition to pay; examples include health care and vacation benefits |
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Affirmative Action |
Policies designed to promote the hiring of individuals from groups that have historically faced job discrimination |
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Collective Bargaining |
Negotiations between an employer and a group of employees, usually represented by a labor union to determine the conditions of employment |
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Depression |
•a prolonged economic downturn characterized by plunging real GDP and extremely high unemployment |
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Substitute good |
A product that satisfies the same basic want as another product |
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Complementary good |
A product that is used or consumed jointly with another product. |
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Right to work laws |
A law that prohibits it employers from making union memberships a requirement for getting or keeping a job |
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Types of unemployment |
•Frictional unemployment- happens when a person seeks to enter the workforce or quits one job to seek another •Structural unemployment- happens when advancements in technology eliminates jobs •Seasonal unemployment- happens when businesses shut down or slow down for part of the year •Cyclical unemployment happens when there is a decline in business activity during an economic downturn |
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Gross Domestic Product |
The market value for all final goods and services produced within a country during a given period of time |
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Difference between Real GDP & Nominal GDP |
•R-GDP a measure of a country's economic output valued in constant dollars; real GDP reflects the effects of inflation •N-GDP a measure of a country's economic output valued in current dollars; nominal GDP doesn't reflect the effects of inflation |
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Types of unemployment |
•Frictional unemployment- happens when a person seeks to enter the workforce or quits one job to seek another •Structural unemployment- happens when advancements in technology eliminates jobs •Seasonal unemployment- happens when businesses shut down or slow down for part of the year •Cyclinixal |
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Consumer price index |
A measure of price changes in consumer goods and services over time; the CPI shows changes in cost of living from year to year |
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Inflation |
An increase in overall price level of goods and services produced in an economy |
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Phases of the business cycle |
•Expansion: Period of economic growth •Peak: Highest level of economic activity •Contraction: Period of economic decline •Trough: lowest level of economic activity |
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Recession |
•A period of declining national economic activity, usually measured as a decrease in GDP for at least 6 months |
