Economics EOCT

Economics
A social science studying the allocation of scarce resources and goods

Resources/factors of production
The inputs used by a society to produce outputs

Goods
Finished products

Scarce
Short in supply

Allocate
To distribute according to some plan or system

Opportunity Cost
The value of the best alternative that could have been chosen but was not

Marginal Cost
The cost of producing one more item

Marginal Benefit (Marginal Revenue)
The benefit associated with one additional item

Specialization
Concentrating on a single activity or area of expertise

Market System
Private individuals and firms control all resources and the price and quantity of all goods are determined by the interaction of suppply and demand

Command System
The government controls all markets determining what to produce, how to produce, and for whom to produce

Mixed System
An economy that incorporates aspects from different economic systems

Production Possibility Curve
The maximum an economy can produce based on all inputs

Microeconomics
The interaction of people and businesses within a single market

Firm
Another term for business

Supply
The quantity of goods or services that someone is able and willing to supply at different prices

Law of Supply
The quantity supplied is typically directly proportional to the pirce, all other things being equal

Law of Demand
The quantity demanded is typically inversely proportional to its price, all other things being equal

Equilibrium price
The price where demand exactly equals supply

Equilibrium quantity
The quantity where demand exactly equals supply

Substitute Good
A good that satisfies most of the same needs as the original good

Complementary Good
Goods that tend to be used together

Price Floor
A minimum price for which a product can be sold

Price Ceiling
A maximum price at which a good can be sold

Price Elasticity
The percentage change in quantity divided by the percent change in price – to track how mch a change in price affects a change in quantity

Inelastic
When change in price is greater than the change in quantity demanded

Elastic
A good that is very sensitive to changes in price

Sole Proprietorship
A single owner who takes all the financial risks and reaps all the financial rewards

Partnership
Divides up the risk and reward among a group of people

Corporations
Issue stock

Dividends
Monetary payments to stockholders

Monopoly
Market structure with one producer, high barriers to entry, and no competition

Price maker
A company that has control over what it wants to charge people

Pure (perfect) Competition
Market structure with many producers, no barriers to entry, unlimited competiton, and identical products

Price Taker
A company that has no control over price – it is solely determined by supply and demand

Monopolistic Competition
Market structure with many producers, low barriers to entry, much competition, and differentiated products

Oligopoly
Market structure with few producers, high barriers to entry, and little competition

Macroeconomics
The study of the economic issues of an entire nation

Gross Domestic Product
Consumer expenditures + business investment + Government expenditures + Net Exports

Net Exports
Exports – Imports

Inflation
A rise in the price level

Price Index
Used to measure all future GDP in terms of of the base year prices

Aggregate Demand
Demand for ALL goods and services within a nation

Aggregate Supply
Supply of ALL goods ans services within a country

Recession
A decrease in total output that lasts for more than two or three consecutive quarters

Depression
A steep fall in total output combined with a high unemployment rate for more than a year

Stagflation
When prices rise and GDP falls

Structural Unemployment
Occurs when you have job skills that do not match the job requirements

Frictional Unemployment
Unemployment that occurs while peole are looking for a job that is a good fit

Cyclical Unemployment
Unemployment that rises during a downturn in the economy

Deficit
When government spends more money than it takes in

National debt
When a government operated with a deficit for many years, they build and form this

Federal Reserve System
Created by Congress and acts as the nation’s central bank

Monetary Policy
Refers to changes in the money supply of a nation in order to influence its economy

Fiscal Policy
Expenditures, taxes, and borrowing made by a government in order to influence an economy

Absolute advantage
A country can produce more of a good than another country

Balance of Trade
The value of all products exported from a country minus the value of all products imorted

Balance of payments
All the economic transactions of a country

Tariff
A tax on an imported good

Quota
A limit on the amount of a good that is allowed into a country

Embargo
A government completely prohibits the import of an item

Standards
Used by governjments to ensure the safety of imported goods

Subsidy
Payments to a supplier to reduce the production costs of the supplier

Exchange Rate
The measure of the price of one nation’s currency in terms of another nation’s currency

Apprecite
To increase in value or strengthen

Depreciated
To decrease or weaken in value

Savings
Money deposite secured for a later use

Investment
Money used with the expectation of some future return or benefit

Bank
A safe means to store earnings

Credit Union
Similar services as a bank, but provided only to members

Savings and Loan
Takes deposits and focuses on mortgages and savings

Payday loan company
Provide small loans in return for a portion of an upcoming paycheck

Bonds
An investment that provides a promise to repay the investment plus interest

Stocks
In return for partial ownership of the company, the investor gives that corporation their money to spend

Mutual fund
A collection of various investments

Progressive Tax
The tax rate increases as income increases

Regressive Tax
Tax rate decreases as income increases

Proportional Tax
A flat tax; it does not change with respect to income

Credit worthiness
A measure of whether you’ll be able to pay back a loan properly

Simple Interest
Principle X Rate X Time

Compound Interest
Future interest is determined with the existing amount owed