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49 Cards in this Set

  • Front
  • Back
how people try to satisfy their wants and needs/decision making.
consumers and privately owned businesses make the majority of the decisions.
free market
type of economy in which a central authority makes the decisions
+ ability to change drastically
- no economic freedom, no incentive to work hard
command economy
type of economy based on the traditions of ancestors
+ always know what to do
- nothing new, always the same
traditional economy
type of economy with little or no gov't involvement
mixed economy
type of economy in which the individual interest is the driving force
+ adjust to changes over time, de-centralized decision-making
- boss gets credit
markey economy
someone who risks everything to open a business in order to gain profit.
diagram representing maximum combinations of goods/services an economy can produce when all productive resources are fully employed.
production possibilities frontier
essentials have little monetary value and nonessentials have high monetary value.
paradox of value
factors of production
land, labor, capital, entreprenuership
essential economic questions
what is the product?
how is it going to be produced?
who is it for?
the difference between scarcity and shortage
scarcity is long-term and shortage is short-term
alternative choice
what comes out of a decision
opportunity cost
costs that change
variable costs
costs that remain the same and are to be paid no matter what
fixed costs
gov't owns some factors of production and has a role in determining how goods are produced
+ provides for the needs of people, free public education
everything is owned and run by the gov't
+ no worries, all needs will be met
- lose freedom, lose incentive to work hard
Stalin's centralized economic plan to help the development of industry and agriculture of the Soviet Union
five year plan
price goes up, demand goes down
law of demand
supply goes up, price goes up
law of supply
change in quantity demanded due to a change in the relative price of the product

if price of a product's substitute goes up, the demand for the product will go up
substitution effect
change in quantity demanded caused by a change in a consumer's real income when the price of a product changes.
income effect
goods that complement each other
ex. pb & j

an increase in a product's price makes the demand for the product's complement go down.
complimentary goods
shows quantity demanded at all possible prices
demand schedule
graph showing quantity demanded at all possible prices
demand curve
shows various amounts supplied at all prices
supply curve
factors that cause change in quantity demaded
prices, income effect, substition effect
factors that cause change in supply demanded
prices, income
relatively small change in price, large change in demand
relatively small change in price causes relatively small change in demand
proportional change in price and demand
unitary elastic
relationship between the factors of production and the output of goods and services
theory of production
stages of production
increasing returns, diminishing returns, negative returns
total and marginal product both increasing
increasing returns
total product increas, marginal product decreases
diminshing returns
total and marginal product decrease
negative returns
decreasing satisfaction or usefulness as additional units are added
diminishing marginal utility
extra cost of producing one additional unit of production
marginal cost
varible plus fixed cost; all costs associated with production
total cost
quantity supplied is greater than quantity demanded
quantity supplied is less than quantity demanded
stabilization, supply and demand intersect
maximum legal price of a product
price ceiling
minimum legal price of a product
proce floor
forced common ownership of factors of production
restructuring of soviet union
people own factors of productions and them to generate profits
dollar value of all final goods/services/structures produced with in a country's national borders during a one year period.
gross domestic product