Economics Final Terms – Flashcards
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*What to produce *How to produce it *For whom to produce #To help them make careful economic choices about the way they use resources.
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What three basic questions must every society answer, and why?
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*Land: Gift of nature or natural resource. *Capital: tools, equipment, factories used in production. *Labor: People, their efforts and abilities. *Entrepreneurs: People who start new business or bring a product to market.
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The factors of production
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*Goods are tangible products, and services are work or labor performed for someone.
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How do goods and services differ?
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*High productivity results in economic growth
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How is economic growth related to productivity?
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*It makes employees more skilled, which increases a company's productivity
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Why is investing in human capital beneficial?
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*During a labor strike people produce fewer goods to sell and usually have less money to spend.
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How might major events such as labor strikes affect you and your community?
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*Economists use models to predict the actions of people and businesses in an economy.
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How do economists demonstrate economic concepts using models?
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Economic issues are often debated in political campaigns. Voters may decide which candidates to support by understanding their position on economic issues.
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How does economics play a part in politics?
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*Cause: not having enough resources to produce all of the things that people would like to have. *Effect: careful decisions have to be made about how to use resources.
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Identify the cause and effects of scarcity?
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*The fact that some necessities have a very low monetary value and some non-necessities have a very high value.
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Describe the paradox of value?
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*New technology can increase productivity, leading to economic growth.
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Explain how new technology can lead to economic growth?
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*It help us better decision maker.
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Explain why economic education is important?
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*Traditional economy #Ritual *Command economy #Owned by government #Controlled by government *Market economy #Controlled by the consumer *Mixed economy #Command economy #Market economy #Traditional economy
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Economic System
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*Communist-more control *Socialist-equal control *Capitalist-less control
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What role does government play in communist, socialist, and capitalist economies?
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*They welcome change and improvement and provide incentives that reward them
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Why are market economies more innovative than either traditional or command economies?
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*Help us determine whether our economic system meets must,if not all, of our needs.
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Explain why it is important for a nation to set economic and social goals?
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*Vote
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What can Americans do to influence the economic goals of the nation?
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*Having laws that prevent this ensures fairness.
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How do laws against false or misleading advertising promote the goal of economic equity?
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1.Economic Freedom 2.Voluntary Exchange 3.Private Property Ownership 4.Profit Motive 5.Competitve
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Explain the five major characteristics of a free enterprise system?
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*Entrepreneur-Risk takers *Consumer-Controls by what they buy *Government-Control or Regulates
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Describe the differences in the roles of entrepreneurs, consumers, and the government.
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*Create Jobs *Risk Takers
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Explain why entrepreneurs are the driving force of the free enterprise system?
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*Advantage-Little uncertainty, everyone knows what to do *Disadvantage-Nothing changes
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What are the advantages and disadvantages of traditional economy?
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*Ignores consumer wants and needs *Rarely rewards individual initiative
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What are the major problems with a command economy?
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*Advantages-Easy to raise financial capital, Limited liability for owners, Unlimited life status, Easy to transfer ownership. *Disadvantages-Double taxation, Difficult and expensive to get a charter, Shareholders have little voice in how the business is run.
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Discuss the advantages and disadvantages of the corporation.
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*Proprietorship-Sole ownership *Partnership-Two or more ownership *Corporation-Many people ownership
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Describe the characteristic of proprietorships, partnership, and corporations.
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*They are larger *Take risker ventures *Money
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How do corporations contribute to the growth of the U.S. economy?
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*Intelligence *A sense of humor *Commitment *Self-Confidence
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What are some personal qualities that a sole proprietor might need to form a successful proprietorship?
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*Responsible for all the debt
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Why is unlimited liability a disadvantages of a proprietorship?
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*General Partnership-Just a partnership *Limited Partnership-Less power, less liability
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What are difference between a general partnership and a limited partnership?
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*Limited Liability *Corporation is fully responsible for its obligations.
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Why do many business owners prefer corporations over other forms of business organization?
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*Take their profit *Reinvest to produce additional products.
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Describe how a firm can generate funds internally to grow and expand?
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*To grow faster *More efficient *To catch up *Acquire new product lines
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Why do businesses merge?
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*A change in price
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What causes a change in demand?
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*As price increases quantity demanded decrease, As price decreases, quantity demanded increases. *Inverse
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Explain how a change in price changes the quantity demanded of an item?
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*For most goods, more income will increase demand.
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How would you expect consumer income to affect demand?
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*It shows how people's buying habits are impacted by the price of a good.
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How does a demand curve help explain people's buying habits?
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*Marginal utility is difficult to measure because it is subjective.
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What problems might economists have in trying to measure marginal utility?
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*If we get less satisfaction from more of a product, we wont be willing to pay as much for another unit of the product.
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How does the principle of diminishing marginal utility explain the price we pay for another unit of a good or service?
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*Sellers offer products at the price at which they can make the most profit. Luxury goods can command high prices.
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Some items such as luxury goods are not offered at a lower price. why?
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*Consumer income, Consumer tastes, Substitutes, Consumer expectations, Complements, and the number of consumers.
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What are the major non-price factors that affect changes in demand?
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*Elastic-High demand *Inelastic- low demand *Unit elastic demand-same demand
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How do Consumers react to price changes on products with elastic, inelastic, and unit elastic demand?
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*A demand schedule shows the quantities demanded of a good at all prices. A demand curve is a graph showing the same information.`
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Describe a demand schedule and a demand curve. How are they alike? How do they differ?
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*The law expresses the inverse relationship that exists between price and quantity demanded.
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Discuss what is meant by the Law of Demand?
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*Income effect-When the price of a good drops, consumers have extra income and might buy more of the good, increase demand. *Substitution effect-If the price of a good rises, Consumers will buy cheaper substitutes, decreasing demand.
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Explain the difference between the income effect and the substitute effect?
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*The quantity supplied will also double.
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How does the quantity supplied change when the price doubles for a unit elastic product?
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*If the price of a product is increasing a producer might decide to produce more of it.
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Name one way a supply curve could be used to make a production decision?
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*Supply describes the actions of produces, while demand represents the buyer's side.
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Explain how supply is different from demand?
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*Less workers *Shortage of additional resources *storage space
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If you were a producer , what might prevent you from increasing the quantity supplied in response to an increase in price?
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*May produce fewer bicycles
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How might a producer of bicycles adjust supply when prices decrease?
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*Training and motivating workers
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How can management increase productivity?
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*The amount of a good or service that the producer is willing and able to provide.
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Describe what economist mean by supply?
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*Cost of resources *Productivity *Technology *Taxes *Expectations *Government regulations *Number of sellers
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List the factors that can cause a charge in supply?
