Economics 100 Terms – Flashcards
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Scarcity
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the condition that occurs because people's wants and needs are unlimited while resources needed to produce services and goods to meet these needs and wants are limited
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Basic Economic Questions
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"for whom to produce, what to produce, and how to produce"
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Opportunity Cost
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the value of any alternative that you must give up when you make a choice
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Production Possibilities Frontier (PPF)
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all possible combinations of two goods that an economy can produce in a certain period of time, under the conditions of present technology, no unemployed resources and efficient production.
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Allocation
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the process of choosing which nedds will be met and how much of our resources will we use to satisfy them
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Labor
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one of the resources used to produce goods and services - human factor of production
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Capital
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produced goods that can be used as resources one for further production - the means of production including tools, offices, equipment, also the financial capital - money to acquire land and labor
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Natural Resources (Land)
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In economics any material produced by nature that can be used to produce goods or provide services.
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Trade Off
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The choice between alternative uses for a given quantity of a resource.
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Specialization
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Concentrating the activity of a unit of production resource on a single task or operation.
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Absolute Advantage
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The situation in which a country can produce more of a good than another co. can produce w/ same quantity of resources.
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Comparative Advantage
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The situation in which a country can produce a good at a lower opportunity cost than another country.
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Free Enterprise
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An economic system in which individuals own most, if not all, the resources and control their use.
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Command (Social) Economy
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An economy in which the major economic questions are determined by the government representing the interests of the entire society.
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Mixed Economy
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An economy system where the basic economic questions are resolved by a mixture of market forces with government direction (free enterprise and socialism).
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Traditional Economy
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An economic system in which the basic questions are answered by social customs.
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Market Economy
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An economy in which the economic questions are decided by the individuals in the marketplace.
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Circular Flow
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A model of the economy that summarizes the flow if goods and services production from the four sectors -- households, businesses, government, and financial institutions.
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Democratic Socialism
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An economic system where the means of production are mostly in private hands, marjet driven. Higher taxes to deal with social services provided by the state. Sometimes called a welfare state.
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State Socialism (Communism)
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An economic system where means of production in the hands of gov't Economic decisions made by a central authority. All wages are set.
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Capitalism
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An economic system where means of production are owned by private individuals to produce for profit. Production is determined by market forces.
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Adam Smith
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Considered the Father of Modern Economics, wrote the "Wealth of Nations," this book was a major influence on our Founding Fathers and their pro free enterprise views coupled with limited government.
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Law of Supply
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States that the quantity of goods supplied will be greater at a higher price than it will at a lower price. The relationship is direct.
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Law of Demand
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States that the quantity demanded of a good will be greater at a lower price than it will be quantity demanded at higher prices. This is an inverse relationship.
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Equilibrium Price
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the price at which the quantity demanded equals the quantity supplied
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Market Price
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the prevailing price at which merchandise, securities, or commodities are sold.
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Surplus
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the quantity supplied of an item at a given price exceeds the quantity demanded.
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Alfred Marshall
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an economist whose book "Principles of Economics" had a major impact on the economics profession. Most known for defining the concepts of elasticity of demand.
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Utility
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the satisfaction from consumption; sense of well-being
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Elasticity
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measurement of the degree of the response of a change in quantity to a change in price.
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Competition
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the rivalry between two or more businesses striving for the same consumer market.
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Profit
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net returns after subtracting total costs from total revenue
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Entrepreneurs
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individuals who take the risk of producing a product for a profit
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Bond
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a certificate of debt stating the amount a corporation has borrowed from the holder and terms of repayment
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Stock
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shares of ownership in a company
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Mutual Fund
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financial organization that pools people's money and invests it
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Broker
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one who acts as an agent for others in negotiating contracts, purchases or sales in return for a fee or commission.
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Blue Chip Stock
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a stock that sells at a higher price because of public confidence in its long record of steady earnings
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Preferred Stock
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the portion of a corporations stock having a priority or preference over the common stock in the distribution of dividends and assets, usually owned by employees
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Bear Market
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an investor whose concerns in the stock market causes him to sell securities thinking the price will fall thus cutting losses.
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Bull Market
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an investor whose concern in the stock market causes him to buy securities anticipating the price to rise thus making a profit.
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Dividends
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the part of a corporation's income paid to its stockholders.
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Investment
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an increase in the amount of productive capital in the economy.
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Cooperative
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A business that provides services for its members and is not run for profit. Members pool their resources to gain some benefits not available to them as an individual.
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Franchise
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a contract between by which a firm (corporation) that lets an individual (or group) use their name and sell their product, in return for payments being made and requirements being met.
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Sole Proprietorship
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a form of business in which there is one owner
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Partnership
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a type of business organization to which there are two or more owners.
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Corporation
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an organization of people legally bound together through a charter to conduct some type of business
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Unemployment
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the condition of those who are willing and able to work and actively seeking work but who do not currently work
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Social Security Tax
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A tax that provides disability and retirement for most working people.
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SDI- State Disability Insurance
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a partial wage-replacement insurance plan for California workers. It provides affordable, short-term benefits to eligible workers who suffer a loss of wages when they are unable to work.
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Minimum Wage
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the lowest wage that can be paid for certain kinds of work
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Unions
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an organization formed to protect the rights of workers
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Salaries
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a fixed amount of money paid to a person on a regular basis
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Downsizing
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restructuring a firm and decreasing its size to cost less, be more productive, and become a more efficient operation.
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Interest Rates
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the price paid for the use of money, usually a % of total loan
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Wages
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a payment for labor services
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Collective Bargaining
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the process of having a union negotiates with management to determine the terms of employment for all workers rather than each individual
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Monopoly
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a form of market organization in which there is only one seller of a product
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Oligopoly
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a form of market organization of firms in the same industry acting together to make decisions
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Cartel
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a formal organization of firms in the same industry acting together to make decisions
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Merger
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a joining of two companies, when one co. buys more than 1/2 the stock in the other co. thus they act as one
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John M. Keynes
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20th century economist who changed the way we thought about the economy. He opened doors to government inclement in the economy.
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FDIC- Federal Deposit Insurance Corporation
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the agency that insures deposits of individual and businesses for up to $100,000 in the event of bank failure
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Federal Reserve System
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the central banking system for the United States
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Monetary Policy
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the changing of the quantity of money in the economy in order to reduce unemployment, keep prices stable and promote economic growth
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Near Money
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assets - saving accounts that can be easily and quickly turned into money
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Gresham's Law`
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an economic law stating that bad money drives good money out of circulation
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Savings
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the unspent income that households do not spend on goods or services. Also sums of money stored or when prices are reduced.
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Fait Money
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money not redeemable for anything intrinsic value, money declared by government decree
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Currency
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a legal tender that is established by the government used as a value on the market
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Stagflation
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occurrence of inflation and unemployment at the same time
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Debt
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an obligation or liability to pay or render services, something owned for goods or services
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Real GDP
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GDP that has been adjusted for price changes
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GDP- Gross Domestic Product
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is the total dollar value of all goods and services produced by resources located in the United States during one years time
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Appreciation
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a rise in value or price
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Mortgage
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a pledge to a creditor as a security against a debt
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Deficit
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the amount by which spending exceeds revenue for the year
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Recession
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the condition in which unemployment is high and GDP falls for two or more consecutive quarters
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Inflation
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a rise in the average level of prices
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Deflation
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a decline in the average level of prices
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IRS-Internal Revenue Service
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the agency in charge of collecting taxes for the US government
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Assets
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an item of value that can be used to settle debt
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CPI-Consumer Price Index
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a number used to calculate changes in the average level of prices for a number of items typically bought by urban families
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COLA-Cost of Living Adjustment
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automatically adjusts employee wages to math inflation
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Tax
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a charge imposed by the government on people or property for public purposes
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Budget
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an estimation of expected income, expenses, and savings. It is the tool to help a person meet financial goals.
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Fiscal Policy
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the changing of federal government spending and taxes in order to control the level of economic activity
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NAFTA-North American Free Trade Agreement
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is a trade agreement between Mexico, US, and Canada to promote economic growth and prosperity for all three economics by eliminating barriers to free trade
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Trade
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the business of buying and selling, conducting commerce, exchange goods
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World Bank
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an organization established by UN at the end of WWII. The goal is to reduce poverty by strengthening economies of poor nations through monetary loans and other programs
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Tariff
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a tax on imports
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Quota
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a limit on the amount of imports or exports
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Import
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goods or services that one country buys from another country
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Barter
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a direct trade of goods or services
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Exchange Rate
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the rate at which one type of money can be traded for another
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Export
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goods or services that one country sells to another
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Protectionism
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The use of trade barriers to protect a nations industries against foreign competition
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International Monetary Fund
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was established to promote economic cooperation by maintaining an orderly system of world trade and exchange rates
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WTO - World Trade Organization
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established in 1995. It was a global commerce agency with the same legal status as the United Nations. It is empowered to enforce global commerce rules with the imposition of economic sanctions.
