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The value of other products that must be given up or sacrificed to produce a unit of a product or the value of the best alternative given up when a choice is made is known as:

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opportunity Cost

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the study of how individuals and society use their limited resources to try to satisfy unlimited wants and needs

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the law of increasing opportunity cost

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the theory that rational people pursue their own self-interest and, in the pursuit, will respond to incentives

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the rational person assumption

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the price and quantity demanded of a good as inversely related is the basis for the

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the law of demand

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the problem that human wants exceed the production possible with the limited available resources.

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Scarcity

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when the price of a good decreases, a consumer's income has greater purchasing power meaning the consumer can buy goods in greater quantities. When the price of a good increases, a consumers' income has less purchasing power meaning the consumer can buy a lessor quantity of the good.

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income effect

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Because of scarcity, a consumer will have only limited income and will try to attain as much consumer satisfaction as possible from that limited income. As a result, the consumer will look to buy lower priced goods as a replacement for higher priced goods.

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substitution effect

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the way in which a society answers economic questions such as which goods to produce with limited resources while trying to satisfy unlimited human needs

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an economic system

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An economic system characterized by the belief that private property is economically and politically harmful and that the government knows what is best for the general public

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Socialism

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An economic system characterized by the belief that private property is economically and politically desirable, market prices contribute to economic efficiency and the government is inherently inefficient and should be limited

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Capitalism

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a determinant of supply

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cost of production

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Income, preference, number of buyers in the market, and expectations of the future.

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determinants of demand

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the resource owner's pursuit of self-interest will generally serve the best interest of society as if guided by an invisible hand to do the right thing for society. Created the field of economics.

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Adam Smith

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the basic economic problem of scarcity requires people to make choices and, in doing so, people make comparisons between the marginal benefit of their choice with the ______________ ____________ of their choice.

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Marginal cost

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Land , Labor, Capital, Entrepreneurship, and knowledge

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the factors of production

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What to produce? How to produce? For whom to produce?

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the three economic questions for an economy

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The basic economic problem is scarcity because

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Human wants are unlimited while resources are limited

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the demand curve is downward sloping showing that at higher prices

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the quantity is less than at lower prices

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the supply curve is upward sloping showing that as the price of a good increases

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the quantity supplied increases

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a table or graph showing the different combinations of price and quantity demanded of a good.

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demand curve

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market value of final goods and services produced by labor and property located in the nation or country being measured.

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GDP

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Buying of permanent property and businesses in foreign countries.

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foreign direct investment

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an economic and political system in which the government makes almost all economic decisions and owns almost all the major factors of production.

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Communism

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the physical and mental talent of people used to help produce goods and services.

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Labor

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The amount of other products that must be forgone or sacrificed to produce a unit of this product

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Opportunity cost

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classification of economics that focuses on facts, cause and effect relationships of economics.

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positive economics

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the want satisfying power of a good or service

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Utility

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Examines either the economy as a whole or its basic subdivisions or aggregates. The big stuff.

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macroeconomics

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economic model that shows the interaction of individuals (households) who own the resources that are the key inputs into the productive process with businesses who use these inputs (factors of production) to create goods and services.

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circular flow model

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a contractual agreement whereby someone with a good idea for a business sells others the rights to use the name and sell a product/service in a given area.

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franchising

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a firm (licensor) provides the right to manufacture its product or use its trademark to a foreign company (licensee) for a fee (royalty).

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licensing

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An economic system based on the premise that some basic businesses, like utilities, should be owned by the government in order to more evenly distribute profit among the people.

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socialism

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long-term partnership between two or more companies established for the purpose of helping both companies build competitive market advantage. Ordinarily, each company absorbs its own cost, risk, management, and profit.

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strategic alliance

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analyzes decisions and behavior of individuals and firms in making purchases and sales as regards the allocations of limited resources. (the small stuff).

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microeconomics

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Foreign company produces private-label goods and a domestic company then attaches its own brand name or trademark. A form of outsourcing. Sells the item as if it is its own.

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contract manufacturing

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the gap between limited resources and unlimited wants.

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scarcity

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company that manufactures and markets in several different countries, has stock ownership and management in several different countries, has a physical presence such as manufacturing capacity or some other physical presence in different nations.

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multinational corporations

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A type of economic system whereby the factors of production are owned privately, by individuals or individual companies, not the government.

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capitalist

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A partnership between two or more companies for the purpose of undertaking a major project.

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joint venture

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land, labor, entrepreneurship, capital, and knowledge.

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factors of production

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Market generally determines what goods and services are produced, who gets them, and how the economy grows.

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free market economies

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Human-made resources such as building, machinery and equipment used to produce goods and services.

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Capital

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actively seeks out opportunities and accepts risks for them.

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Entrepreneur

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total value of all goods and services produced i an economy.

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economic output

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The rate at which the general level of prices for goods and services is rising yet income is not rising subsequently purchasing power is falling.

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Inflation

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Based on the market basket of goods and services consisting of a wide variety of goods and services purchased by typical consumers.

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Consumer price index

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Price level stability, full employment, and economic growth.

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Three macroeconomic ngoals

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It takes time to match available workers with available jobs. This categorization of unemployment is a always present in the economy and results from temporary transitions made by workers or employers or from workers and employers having inconsistent or incomplete information about jobs and job skills.

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Frictional unemployment

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This categorization of unemployment occurs when workers do not have the skills required for available jobs or that workers live to far from regions where jobs are available and cannot move closer.

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Structural unemployment

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This categorization of unemployment occurs as a factor of overall unemployment that relates to the cyclical trends in growth and production that occur within the business cycle.

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Cyclical unemployment

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Total output measured as the sum of all payments to resource owners.

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National Income

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The monetary value of all finished goods and services produced within a country's borders in a specific period of time, usually 1 year.

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Gross Domestic Product

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A basic measure of standard of living, computed by dividing total output by the population count is known as:

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Per Capita Output

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Recurring increases and decreases in the level of economic activity over a period of years that consists of peaks, recessions, troughs, and phases.

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Business cycle

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The quantity demanded of all goods and services at different price levels.

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Aggregate Demand

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The sticky-wage effect says that wages in an economy can be slow to adjust. This is caused by factors such as:

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Long-term labor contracts, labor unions and general employee resistance to wage cuts.

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The ideal quantity of total output:

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Yields full employment of labor

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The ideal quantity of total output in an economy:

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Is referred to as Natural Real GDP

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The marginal propensity to consume equals:

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Change in consumption/change in income

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The level of total expenditures determines the level of real GDP per the Keynesian Theory therefore:

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An increase in total expenditures will cause an increase in Real GDP. A decrease in total expenditures will cause a decrease in Real GDP.

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GDP adjusted for changes in the price level.

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Real GDP

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The maximum legal price a seller may charge for a product or service is called a:

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Price ceiling

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The minimum price fixed by the government is called a:

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Price floor

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The quantity supplied of all goods and services at different price levels.

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Aggregate supply

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The rate at which the general level of prices for goods and services his rising yet income is not rising subsequently purchasing power is falling.

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Inflation

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Based on the price of a market basket of goods and services consisting of a wide variety of goods and services purchased by typical consumers.

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Consumer price index

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Price level stability, full employment, and economic growth.

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Three macroeconomic goals

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It takes time to match available workers with available jobs. This categorization of unemployment is always present in the economy and results from temporary transitions made by workers and employers or from workers and employers having inconsistent or incomplete information about jobs and jobs skills:

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Frictional Unemployment

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This categorization of unemployment occurs when workers do not have the skills required for available jobs or that workers live to far from regions where jobs are available and cannot move closer.

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Structural unemployment

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This categorization of unemployment occurs as a factor of overall unemployment that relates to the cyclical trends in growth and production that occur within the business cycle.

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Cyclical unemployment

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A trade deficit occurs when:

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Imports > exports

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From the consumers prospective, imports are good if consumer's are whole to purchase the goods & services they want and need at the price they are willing to pay. But, this can cause a trade deficit over time. If this purchasing of imports causes a trade deficit, what does that mean as far as the use of our resources and the effect on our economy.

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Our economy goes downhill because the money is going to another country like China. If everyone would only purchase products from the US the economy would rise. If we made what we are good at and purchased the rest from other countries than we would be in a better economic position.

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In 1776 Adam Smith said in part "...Never make at home what will cost more to make tan to buy..." How does this factor into our discussion on imports and exports? How does this factor into the use of scarce resources?

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If we make something well then we should make it. If we don't make something well or someone else makes it better then we should buy it. If you buy from other countries you use less scarce resources then you would if you tried to make everything. The more you make the quicker resources are used up. Export what you make well import what you don't.

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An excise tax or duty added to the price of imported goods.

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Tarrif

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A limit on the quantity or total value of specific goods that could be imported is referred to as a:

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Quota

Macroeconomics Final Exam Study Guide Chapters 1-11 – Flashcards

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