Civics – Economics Vocabulary – Flashcards
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The study of how individuals and nations make choices about ways to use scarce resources to fulfill their needs and wants
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Economics
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- Inability to satisfy all wants at the same time - Resources and goods are limited - Requires that choices be made - Unlimited wants + limited resources --> Scarcity
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Scarcity
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- Scarcity --> choices --> opportunity cost - The cost of the next best use of your time or money to do one thing rather than another.
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Opportunity cost
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1. What to produce 2. How to produce 3. Who will get them Communism - Gvmt decides all.
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3 Basic Economic Questions
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1. Natural resources - (Land, water, minerals, animals, forests) 2. Labor (human) - (workforce... both physical and mental) 3. Capital - produced goods that can be used as resources for further production. (machinery, tools, computers) 4. Entrepreneurship - starting a new business, introducing a new product, improving on a product or service, improving management techniques.
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4 factors of production
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A market is any place where there is an exchange of resources for goods and services for resources.
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Market
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How much (quantity) of a product or service is desired by customers (us). Demand can only exist under all 3 conditions: 1. Have resources 2. Willing to give up resources 3. Want a good or service
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Demand
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An economic rule stating that the quanta demanded and price are inversely proportional.
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The Law of Demand
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Total demand of all consumers for a product or service. the following factors will cause a change in market demand 1. # of customers 2. Consumer tastes 3. Consumer expectations 4. Substitute/competing products 5. Complementing products
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Market Demand
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Represents how much the market can offer. The quanta supplied refers to the amount of a certain good producers are willing to supply when receiving a certain price.
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Supply
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1. Price and quantity supplied are directly proportional. 2. Suppliers will typically offer more forsake at higher prices and less at lower prices. 3. Profit motivates producers.
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The Law of Supply
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The interaction of supply and demand High Demand + Low Supply = Price SHARP INCREASE High Demand + High Supply = Price INCREASE Low Demand + Low Supply = Price DECREASE Low Demand + High Supply = Price SHARP DECREASE
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Price
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- Found in rural, non-developed countries - Customs and traditions answer the basic economic questions - Technology is not used - Farming, hunting, and gathering are done the same way as the previous generations - Economic activities are centered around the family - Men and women are given different economic roles and tasks
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Traditional Economy
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- The government or other central authority answers the 3 basic economic questions. - Change can occur easily - Little individual economic freedom - No competition - Businesses are not run to create profit - Few choices - Factories are concerned with quotas - Shortages are common - Government dictates your job - Government sets the prices of goods and services
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Command Economy
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- Resources are owned and controlled by individuals - Individuals answer the basic economic questions - Individuals compete to earn profit - Individual freedom is key - Decisions are made by the basic principles of supply and demand - Motivated by profit - Lots of competition among businesses - No government intervention
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Free Market Economy
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- Government and individuals share the decision making process - Government guides and regulates production of goods and services (Laissez-Faire)
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Mixed Economy
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- Markets - Economic freedom - Private property rights - Competition - Profit Motive - Consumer Sovereignty - Individual initiative
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7 features of the American Economy
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Place where goods and services are exchanged
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Markets
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Right to choose what we buy and what we do with our money
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Economic Freedom
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Freedom to own and use our property as long as we don't interfere with others.
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Private Property Rights
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The struggle between buyers and sellers to get higher quality, lower prices.
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Competition
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What is left after all the costs of production have been paid... is what motivated producers
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Profit Motive
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The consumer is king... through their purchases they decide what goods and services will be produced
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Consumer Sovereignty
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Encourages people to take risks... entrepreneurship
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Individual Initiative
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Famous Economist... wrote the Wealth of Nations. (I don't have the rest of the definition)
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Adam Smith
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- Owned by individual - Controlled and managed by the owner or person employed by owner Positives: - Pride of owning business - Receive all profit - Make all decisions Negatives: - Personally liable for losses (unlimited liability) - Difficult to raise financial capital - Not easy to find qualified employees
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Sole Proprietorship
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- Owned by 2 or more people - Articles of partnership... legal document that spells out specific responsibilities of each owner Positives: - Easy to gather funds - Multiple talents - Division or responsibilities Negatives: - Complex legal structure (articles of partnership) - Owners have unlimited liability
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Partnerships
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- Need a charter... government document granting permission to organize - Charter specifies amount of stock that will be issued - Stockholders become owners - Use $ from stock sales to setup and run business Positives: - Easy to obtain $ - Board of directors can hire professional Managers to help run business - Ownership is easily transferred - Limited liability... corporation not owners is responsible for debts and losses Negatives: - Expensive and complex to set up - Business owners have little say in management - Subject to more government regulations - Double taxation... corporation pays taxes on profits - Stockholders pay taxes on those earnings
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Corporation
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Goods that when consumed by one individual cannot be consumed by another. Examples: clothes, shoes, food, electronics, insurance, haircuts, medical services, auto maintenance Exclusion principle - a person must pay for the product in order to use it
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Private goods/services
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Goods that are consumed collectively Examples: public parks, libraries, museums, highways, national defense, street lighting, police, fire department, education Non-exclusion principle - no one is excluded from consuming the benefits of a public good or service Public goods and services are crucial to the economy because they create jobs and they provide products and services to all people regardless of socio-economic status.
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Public goods/services
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Unintended side effects of an action that affects someone not involved in the action can be both positive and negative.
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Externality
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Market situation when an individual or business has control over a particular product or service. Examples: Standard oil, Ford (early 1900's)
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Monopoly
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Market situation in which the costs of production are minimized by having a single firm produce the product. Examples: Dominion Power, water
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Natural Monopoly
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Laws to promote and preserve competition, controls monopolies. Example: Sherman Antitrust Act - used to break up standard oil, AT&T
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Anti-trust laws
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Company pulls a product off the shelf or agrees to make changes for better safety Examples: Meat (E.Coli), Toyota (brakes), GM (brakes)
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Recall
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Environmental Protection Agency Goals and Priorities: - Climate change - Improving air quality - Safety of chemicals - Protecting America's waters - Working for environmental justice
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EPA
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Food and Drugs Administration Mission: - Helping to speed innovations that make medicines and foods safer and more effective - Providing the public with accurate, science based information - Insuring security of the supply of foods and medicine products
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FDA
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Federal Trade Commission FTC testifies on protecting social security numbers, millions of consumers are victims of identity theft each year. Goals: - Consumer protection and competition jurisdiction in broad sectors of the economy - law enforcement - creates practical and plain-language educational programs for consumers
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FTC
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Federal Communications Commission - Regulates public airwaves - Nationwide and worldwide wire and radio communication Public safety - 911, Amber Alert
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FCC
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Written in 1906... exposed the terrible working conditions in the meat-packing industry... leading to new federal food safety laws.
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The Jungle (by Upton Sinclair)
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An experiment lead by Dr. Wiley (father of the FDA)... volunteers ingested various chemical preservatives)... human "guinea pigs"
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Poison Squad
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The utilization of economic goods in the satisfaction of wants. Consumer preferences and price determine what is purchased and consumed.
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Consumption
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A thing that motivates or encourages one to do something Ex: Sales, rebates, discounts
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Incentive
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To bring goods or services from abroad for sale
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Import
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The sending of goods or services to another country for sale
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Export
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- Solve the problem of scarcity - Obtain goods they cannot produce - Reflect comparative advantage (allows nations to specialize and use resources more productively) - Create jobs - Establish and maintain good relations w/ other countries
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Why Nations Trade
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The ability of an individual or group to carry out a particular economic activity. Example: The United States has a comparative advantage over other countries for producing airplanes, because we can produce them more efficiently.
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Comparative Advantage
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A tax or duty to be paid on a particular class of import or export
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Tariff
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A limited or fixed number of people or things
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Quota
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1. Can force consumers to pay higher prices 2. Foreign produces can respond to quotas by establishing factories in the US
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Problems with trade barriers
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An economic and political association of 28 European countries as a unit with internal fee trade and common external tariffs. - No trade barriers between countries - Many share the same currency (euro) exchange rate... The price of one nation's currency in terms of another: (As of 5/1/2014: 1 Euro = $1.39)
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European Union (EU)
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North American Free Trade Agreement - Enacted to help remove trade barriers between Canada, Mexico, and the US - Some felt that this agreement allows companies to move to Mexico w/ lower wages, poor working conditions and a loss of jobs for the US - Some felt that this agreement will increase trade and stimulate our economic growth by putting low-cost goods on the market
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NAFTA
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World Trade Organization An international body founded in 1995 to promote international trade and economic development by reducing tariffs and other restrictions. - Polices or oversees trade among nations - Provides assistance to developing countries - Helps settle trade disputes - Has been criticized for favoring large corporations
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WTO
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The value of currency for the purposes of converting to another
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Exchange rate
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The difference between the monetary value of exports and imports, the commercial net exports.
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Balance of Trade
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When the value of a nation's imports exceeds its exports. A nation is buying more than they are selling. the US currently has a big trade deficit.
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Trade Deficit
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When the value of a nation's exports exceed its imports. A nation is selling more than they are buying.
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Trade Surplus
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Gross Domestic Product Market value of all final goods and services produced within a country in a given period. It is often considered an indicator of a country's standard of living. US's GDP is 16 trillion USD.
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GDP
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A sustained increase in the general price level of goods and services in an economy over a period of time. Reduces purchasing power of money. May change consumer choices.
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Inflation
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A period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters/6 months - Results in loss of jobs - Further decline in the economy
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Recession
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Federal Reserve - Central bank of the United States - Establish and maintain public confidence in the banking system - Safety of deposits - Keep inflation low, prices stable - Foster a healthy and growing economy - Does not manufacture money. Stores money. - When commercial banks need money, they order it from the nearest Federal Reserve bank. Ours is in Richmond, VA.
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FED
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- Full service banks - Checking, savings, mortgages, car loans - ex. Bank of America, Suntrust, Capitol One - Commercial banks earn money by charging interest on stored money.
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Commercial Banks
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- Originally created to loan people money to buy homes - Many failed in the 1980s - Today they are much like commercial banks
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Savings and Loans
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- Not for profit. - Sponsored by large businesses, labor unions or government institutions. - Open to members and their family of the specific group - Lower costs - Same services as commercial banks
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Credit Unions
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- Prices people pay to borrow money or are paid to lend money - Lower interest... people borrow more... save less - Higher interest... People borrow less... save more
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Interest Rates
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This may appear on the SOL. Centrally Planned = Government Controlled = Command Economy
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Centrally Planned = Government Controlled
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Someone who takes a risk to produce goods and services in search of profit.
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Entrepreneur
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- Safe product - Be informed - Choice - Be heard - Redress (compensation for damaged or unsafe products)
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5 Consumer Rights
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Federal Income Tax
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16th Amendment
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- Coins... US Mint - Federal Reserve Notes... paper currency created by Bureau of Engraving and Printing - Deposits in bank accounts that can be accessed by checks and debit cards.
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3 Type of Money in the US
