Economics : Chapter 6-8 – Flashcards
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Price
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Monetary value of a product as established by supply and demand
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Rationing
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System of allocating goods and services without prices
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Ration coupon
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Permit allowing holder to receive a given amount of a rationed product
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Rebate
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Partial refund on a product's original price
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Economic model
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A simplified version of a complex behavior expressed in the form of an equation, graph, or illustration
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Equilibrium price
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Price where quantity supplied equals quantity demanded
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Surplus
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Situation where quantity supplied is greater than quantity demanded at a given price
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Shortage
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Situation where quantity supplied is less than quantity demanded at a given price
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Price ceiling
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Highest legal price that can be charged for a product
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Minimum wage
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Lowest legal wage that can be paid to most workers
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Price floor
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Lowest legal price that can be paid for a product
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Target price
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Price floor for agricultural products set by the government to stabilize farm income
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Non-recourse loan
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Agricultural loan that carries no penalty or further obligation if it is not repaid
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Deficiency payment
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Cash payment making up the difference between the market price and the target price
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What is a signal that helps us make economic decisions by giving information to buyers and sellers
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Price
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What are the 3 basic questions that prices help decide what to produce
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What, How, For whom
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In a competitive market prices are _
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Neutral
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What is one of the strengths of a market economy
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The ability of the price system to absorb unexpected shocks (flexibility)
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What allows people to make decisions quickly and efficiently, with minimal time or effort
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Prices are familiar and easy to understand
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Competitive markets tend to find their own prices without what
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Outside help or interference, prices have no cost of administration
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Countries with what type of economy don't have a price system
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Command
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What type of system is used to decide who gets what without the use of prices
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Rationing
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What is one scenario where rationing was widely used
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Wartime
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What are some problems with rationing
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- People feel their share is too small - Administrative cost - Impact on incentive to produce
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What type of system to economists favor
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Price system
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Economists think of prices as part of an informational network that links all _ in the economy
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Markets
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What is one of the most appealing features of a competitive market economy
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Everyone who participates has a hand in determining prices
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As long as the process is _ and the transaction _, the price system will be about right under a bidding system
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Competitive - voluntary
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Because transaction are voluntary the compromise must benefit _
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Both consumer and supplier
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What point do the supply and demand curve intersect
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Equilibrium point
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What is the other parts of the graph that is not in equilibrium
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Disequilibrium
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Price goes _ as a result of surplus
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Down
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Price and quantity go _ as a result of shortage
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Up
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The equilibrium point is the price that _
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Clears the market (doesn't leave surplus or shortage)
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A change in price is usually caused by a change in what
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Supply or demand (or both)
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What is important to consider when predicting price changes
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Elasticity
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What is one of the main reasons for variations in agricultural prices
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Weather
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If one or both curves are _, the change in price will be smaller
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Elastic
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The price system is more efficient when the market is _
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Competitive
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A competitive market economy is one that _
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Runs itself
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Attempts to achieve _ sometimes results in legislation
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Economic security
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What is one common way to achieve social goals
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Gov set prices at socially desirable levels
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Rent control
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Government control and regulation of the amounts charged for renting a house
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Most economists argue that the minimum wage _ the number of people who don't have jobs
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Increases
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Is minimum wage or the wage set by supply and demanded more efficient
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Wage set by supply and demand
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Result of farming problems from Great Depression
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Conservation Reserve Program
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In an effort to make farming responsive to market forces of supply and demand, Congress passed _
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FAIR
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American agriculture is dependent on
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Subsidies and price supports
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Markets are said to _ when prices in them move significantly
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Talk
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Laissez-Faire
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Philosophy that gov should not interfere with business activities
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When Adam Smith published his book in 1776, the average factory was _ and business was _
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Small - Competitive
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Market Structure
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Nature and degree of competition among firms in the same industry
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Perfect Competition
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Market structure with many well-informed and independent buyers and sellers who exchange identical products
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Perfect competition represents a _ ideal situation that is used to evaluate other market structure
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Theoretical
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What are the 5 necessary conditions are perfect competition must have
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- Large # of buyers and sellers - Buyers and sellers deal in identical products - Each buyer and seller acts independently - Buyers and sellers are reasonably informed about products and prices - Buyers and sellers are free to enter, conduct, or leave business
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Under perfect competition, market supply and demand set _ for the product
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Equilibrium price
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The perfect competitor is often called the _
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Price taker
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What is the closest thing to a perfect competitive market
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"Truck" farming
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Imperfect Competition
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Market structure that does not meet all conditions of perfect competition
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Monopolistic Competition
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Market structure that meets all conditions of perfect competition except identical products
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Product Differentiation
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Real or imagined differences between competing products in the same industry
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Non-price Competition
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Sales strategy focusing on a product's appearance, quality, or design rather than its price
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Oligopoly
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Market structure in which a few large sellers dominate the industry
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Most common example of an oligopoly
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Automobile industry
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Because olipogolists usually act together when it comes to price changes, how do many firms prefer to compete
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Non-price basis
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Collusion
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Agreement, usually illegal, among producers to fix prices, limit output, or divide markets
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Price-Fixing
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Agreement, usually illegal, by firms to charge the same price for a product
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Monopoly
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Market structure with a single seller of a particular product
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Natural Monopoly
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Market structure where average costs of production are lowest when a single firm exists
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The gov often gives a public utility company a _ to avoid certain problems
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Franchise
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Franchise
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The exclusive right to do business in a certain area without competition
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Economies of Scale
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Situation in which the average cost of production falls as a firm gets larger
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Geographic Monopoly
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Market structure in which one firm has a monopoly in a geographic area
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Technological Monopoly
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Monopoly based on a firm's ownership or control of a production method, process, or other scientific advance
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Technology is usually protected though a _
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Patent
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Art and literary works are protected through a _
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Copyright
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Copyright
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The exclusive right of authors or artists to publish, sell, or reproduce their work for their lifetime plus 70 years
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Patent
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An exclusive right to manufacture, use, or sell any new and useful invention for a specific period
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Government Monopoly
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A monopoly owned and operated by the government
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Difference between monopoly and perfect competition
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- Monopoly is larger - Monopolist behaves as the price maker
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Perfect competition is known to be a price _
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Taker
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Market Failure
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Condition that causes a competitive market to fail
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What are the 5 main reasons for market failure
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- Inadequate competition - Inadequate information - Resource immobility - Public goods - Externalities
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Public Goods
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Goods or services whose benefits are available to everyone and are paid for collectively
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Externality
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Economic side effect that affects an uninvolved third party
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Negative Externality
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Harmful side effect that affects an uninvolved third party
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Classic example of a negative externality
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Pollution
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Positive Externality
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Beneficial side effect that affects an uninvolved third party
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Classic example of positive externality
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Education
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Trust
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Illegal combination of corporations or companies organized to hinder competition
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Price Discrimination
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Practice of selling the same product at different prices to different buyers
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Cease and Desist Order
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Ruling requiring a company to stop an unfair business practice that reduces or limits competition
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Public Disclosure
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Requirement that a business reveal information about its products or its operations to the public
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What was the nations first significant law against monopolies
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Sherman Act
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What did Congress pass to give the government more power over monopolies
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Clayton Antitrust Act
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Transparency
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Used to indicate that information and actions are not hidden and easily available for review
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Do public goods make the economy more or less productive
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More
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Cartel
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Group of sellers or producers acting together to raise prices by restricting availability of a product
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Today, _ out of every _ working Americans is a member of a labor union
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1 of every 8
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What played a major role in helping create the legislation that affects our pay and working conditions today
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Unions
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What was the first attempt to organize labor in America
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In 1778 printers in NYC joined together to demand higher pay
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Most unions are comprised of _
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Skilled workers
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Who posed a threat to unions that were working to preserve existing wage and labor standards
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Immigrants
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What led to higher prices and a greater demand for goods and services
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Civil War
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Labor Union
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An organized association of workers in a trade or profession formed to protect and further their rights and interests
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Craft (or trade) union
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Labor union whose members preform the same kind of work
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Industrial Union
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Labor union whose members preform different kinds of work in the same industry
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Strike
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Union-organized work stoppage designed to make an employer meet union demands
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Picket
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Demonstrate or march before a place or business to protest a company's actions
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Boycott
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Refusal to buy products from an employer or company
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Lockout
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Management refusal to let employees work until demands are met
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Company Union
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Union organized, supported, or run by an employer
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What is one of the most famous strikes of all time
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United Mine Workers of America
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What was the courts attitude towards unions
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Unfavorable
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What is the most well known labor union today
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AFL-CIO
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Great Depression
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Worst period of economic decline in US history, lasting from 1929 to approx. 1939
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Growing antiunion feelings led to what
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Taft-Hartley Act
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Right-to-Work Law
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State law making it illegal to require a worker to join a union
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Independent Union
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Labor union not affiliated with the AFL-CIO or the Change to Win Coalition
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Closed Shop
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Arrangement under which workers must join a union before they are hired
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Union Shop
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Arrangement under which workers must join a union after being hired
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Modified Union Shop
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Arrangement under which workers have the option to join a union after being hired
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Agency Shop
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Arrangement under which nonunion workers must pay union dues
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An agency shop is also known as _
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Faire share
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Civilian Labor Force
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Non institutionalized part of the population, aged 16 and over, either working or looking for a job
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What group is most likely to belong to unions
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Blacks
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What states have union membership rates above 20%
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Alaska, Hawaii, and New York
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What states have union membership below 5%
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GA, LA, NC, SC, TX, VA
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Most disputes occur between who
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Labor and management
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Wage Rate
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Prevailing pay scale for work preformed in an occupation
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Are wage rates the same or different for occupations
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Different
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Unskilled Labor
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Workers not trained to operate specialized machines and equipment
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Semiskilled Labor
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Workers who operate machines that require a minimum amount of training
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Skilled Labor
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Workers who are trained to operate complex equipment and require little supervision
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Professional Labor
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Workers with a high level or training, education, and managerial skills
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Market Theory of Wage Determination
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Explanation of wage rates relying on theory of supply and demand
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If demand is high and supply is low, are wages higher or lower
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Higher
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Equilibrium Wage Rate
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Wage rate leaving neither a shortage nor surplus in the market
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Theory of Negotiated Wages
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Explanation of wage rates based on the bargaining strength of organized labor
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Seniority
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Length of time a person has been on a job
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Signaling Theory
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Theory that employers are willing to pay more for people with certificates, diplomas, and other indicators of superior ability
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Collective Bargaining
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Process of negotiation between union and management representatives over pay, benefits, and job-related matters
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Grievance Procedure
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Provision in a labor contract that outlines how future disputes and disagreements will be resolved
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Mediation
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Process of resolving a dispute by bringing in a neutral 3rd party
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Arbitration
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Agreement by 2 parties to place a dispute before a 3rd party for a binding settlement
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Fact-Finding
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Agreement between union and management to have a neutral 3rd party collect facts about a dispute and present non-binding recommendations
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Injunction
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Court order issued to prevent a company or union from taking action during a labor dispute
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Seizure
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Temporary government takeover of a company to keep it running during a labor-management dispute
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Who may enter a labor-management dispute by publicly appealing to both parties to resolve their differences
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President
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Has union membership been increasing or decreasing in today's economy
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Decreasing
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Giveback
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Wage, fringe benefit, or work rule given up when renegotiating a contract
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Two-Tier Wage System
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Wage scale paying newer workers a lower wage than others already on the job
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Glass Ceiling
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Seemingly invisible barrier hindering advancement of women and minorities in a male-dominated organization
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Set-Aside Contract
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Guaranteed contract or portion of a contract reserved for a targeted group, usually a minority
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Minimum Wage
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Lowest legal wage that can be paid to most workers
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Current Dollars
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Dollar amounts or prices that are not adjusted for inflation
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Real (or constant) dollars
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Dollar amounts or prices that have been adjusted for inflation
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Base Year
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Year serving as point of comparison for other years in price index or other statistical measure
