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61 Cards in this Set
- Front
- Back
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Economic Perspective
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Logical reasoning process for organizing your thoughts and understanding economics
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Economics
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the study of how society chooses to allocate its scarce resources to the production of goods and services in order to satisfy unlimited wants
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Scarcity
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the condition in which human wants are forever greater than the available supply of time, goods, and resources
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ceteris paribus
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A Latin phrase that means while certain variables change, "all other things remain unchanged"
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land
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a shorthand expression for any natural resource provided by nature
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labor
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the mental and physical capacity of workers to produce goods and services
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capital
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the physical plants, machinery, and equipment used to produce other goods. Capital goods are human trade goods that do not directly satisfy human wants
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macroeconomics
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the branch of economics that studies decision making for the economy as a whole
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microeconomics
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the branch of economics that studies decision making by a single individual, household, firm, industry, or level of government
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positive economics
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an analysis limited to statements that are verifiable(based on facts and data)
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normative economics
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an analysis based on value judgement
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demand
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a curve or schedule showing the various quantities of product consumers are willing to purchase at possible prices during a specified period of time
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supply
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a curve or schedule showing the various quantities of a product sellers are willing to produce and offer for sale at possible prices during a specified period of time
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law of demand
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the principle that there is an inverse relationship between the price of a good and the quantity buyers are willing to purchase in a defined time period
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law of supply
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the principle that there is a direct relationship between the price of a good and the quantity sellers are willing to offer for sale in a defined time period
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change in quantity demanded
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a movement between points along a stationary demand curve
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change in demand
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an increase or a decrease in the quantity demanded at each possible price. An increase in demand is a rightward shift in the entire demand curve. A decrease in demand is a leftward shift in the entire demand curve.
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Adam Smith
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Father of Economics
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Price elasticity of demand
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the responsiveness or sensitivity to change in price
the ratio of the percentage change in the quantity demanded of a product to a percentage change in its price |
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Price in-elasticity of demand
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the percentage change in the quantity demanded is less than the change in price
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Basic assumption in economics
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the motivation for business decisions is profit maximization
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Profit
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to distinguish between the way economists measure costs and the way accountants measure costs
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Accounting profit
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total revenue minus total explicit costs
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Economic profit
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total revenue minus explicit and implicit costs or total revenue minus total opportunity costs
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Normal profit
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the minimum profit necessary to keep a firm in operation
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monopoly
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a market structure characterized by a single seller, unique product, and impossible entry into the market
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oligopoly
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a market structure characterized by few sellers, either a homogeneous or differentiated product, and difficult market entry
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Perfect competition
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structure characterized by large number of small firms, a homogeneous product, and a very easy entry or exit from the market
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Monopolistic competition
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structure characterized by many small sellers, differentiated product, and easy market entry and exit
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Pros and Cons of Labor unions
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unions increase the demand for labor, unions decrease the supply of labor, unions use collective bargaining to boost wages
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distribution of income
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how wages and salaries are divided among members of society
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absolute poverty
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a dollar figure that represents some level of income per year required to purchase some minimum amount of goods and services
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relative poverty
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a level of income that places a person or family in the lowest 20% of all persons or families receiving income
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poverty line
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the level of income below which a person or a family is considered to be poor
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comparable worth
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the principle that employees who work for the same employer must be paid the same wage when their jobs, even if different, requires similar levels of education, training experience and responsibility
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Social Security
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each worker must pay a payroll tax matched in equal amount by his or her employee
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Unemployment compensation
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a government insurance program that pays income for a short time period to unemployed workers
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Temporary Assistance to Needy Families(TANF)
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gives states broad discretion to determine eligibility and benefits
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Medicare
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available to Social Security beneficiaries and persons with certain disabilities
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Medicaid
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provides medical services to eligible poor under 65 who pass a means test
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Food Stamps
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issues coupons to the poor who use them like money at the grocery store
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Housing Assistance
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assists people who rent private housing
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Expenditure approach
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The national income accounting method that measures GDP by adding all the spending for final goods and services
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Four components of GDP
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consumption
investment government foreign(X-M) |
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Four phases of a business cycle
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peak
recession trough recovery |
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Peak
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the phase of the business cycle in which real GDP reaches its maximum after rising during a recovery
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recession
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a downturn in the business cycle during real GDP declines, and the unemployment rate rises. Also called a contradiction
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Trough
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the phase of the business cycle in which real GDP reaches its minimum after falling during a recession
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Recovery
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an upturn in the business cycle which real GDP rises; also called an expansion
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Unemployment
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a person that is not employed and has been looking for work in the last month
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Unemployment rate
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the percentage of people in civilian labor force who are without jobs and are actively seeking jobs
Unemployment/Civilian labor force x 100 |
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Frictional unemployment
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unemployment caused by the normal search time required by workers with market table skills who are changing the labor force or seasonally unemployed
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Structural unemployment
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unemployment caused by a mismatch of the skills of workers out of work and the skills required for existing job opportunities
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Cyclical unemployment
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unemployment caused by a lack of jobs during a recession
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inflation
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an increase in the general(average) price level of goods and services in the economy
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Savings
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an economy reduction in money, time, or other resource
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Capitalism
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An economic and political system in which a country's trade and industry are controlled by private owners for profit.
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Types of Financial Institutions
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Commercial Banks
Investment Banks Brokerages Investment Companies |
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Fiscal Policy
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The deliberate use of changes in government spending or taxes to alter aggregate demand
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Monetary Policy
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the process by which the monetary authority of a country controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability
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Federal Reserve System
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The 12 Federal Reserve district banks that service banks and other financial institutions within each of the Federal Reserve districts
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