Economics: Unit 4 – Flashcards

In macroeconomics is the total demand for final goods and services in an economy at a given time. It specifies the amounts of goods and services that will be purchased at all possible price levels.

the fluctuation in economic activity that an economy experiences over a period of time. A is basically defined in terms of periods of expansion or recession. The fluctuations in GDP growth. (recovery, prosperity, recession, and depression) 1) Expansion: the act or process of expanding. 2) Contraction: a period of economic decline or negative growth. 3) Peak: the highest value reached by some quantity in a time period. 4) Trough: the lowest turning point of a business cycle

goods that are used in producing other goods, rather than being bought by consumers.

central authority (usually the government) dictates the economic behavior of the individuals

nations can still gain from foreign trade even if other countries can produce goods or services more cheaply

because of the fluctuation of business cycles in the economy

an economic system in which investment in and ownership of the means of production, distribution, and exchange of wealth is made and maintained chiefly by private individuals or corporations, especially as contrasted to cooperatively or state-owned means of wealth.

economics and market competition, takes place within an industry when rival companies cooperate for their mutual benefit. most often takes place within the market structure of oligopoly, where the decision of a few firms to collude can significantly impact the market as a whole.

(German: Zerstörung/Schumpeter's Gale) is a concept in economics which since the 1950s has become most readily identified with the Austrian American economist (Joseph Schumpeter) who derived it from the work of (Karl Marx) and popularized it as a theory of economic innovation and the business cycle. According to Schumpeter, the "gale of creative destruction" describes the "process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one". In Marxist economic theory the concept refers more broadly to the linked processes of the accumulation and annihilation of wealth under capitalism.

an economy in which success in business depends on close relationships between business people and government officials. It may be exhibited by favoritism in the distribution of legal permits, government grants, special tax breaks, or other forms of state interventionism.

was a classical economist known for his Iron Law of Wages, labor theory of value, theory of comparative advantage and theory of rents. also simultaneously and independently discovered the law of diminishing marginal returns.

Act of 1931 is a United States federal law that establishes the requirement for paying the local prevailing wages on public works projects for laborers and mechanics.

a graph showing how the demand for a commodity or service varies with changes in its price.

is the decrease in the marginal (incremental) output of a production process as the amount of a single factor of production is incrementally increased, while the amounts of all other factors of production stay constant. states that in all productive processes, adding more of one factor of production, while holding all others constant, will at some point yield lower incremental per-unit returns. The law of diminishing returns does not imply that adding more of a factor will decrease the total production, a condition known as negative returns, though in fact this is common. example is adding more workers to a job, such as assembling a car on a factory floor. At some point, adding more workers causes problems such as workers getting in each other's way or frequently finding themselves waiting for access to a part. In all of these processes, producing one more unit of output per unit of time will eventually cost increasingly more, due to inputs being used less and less effectively.

a measure of a variable's sensitivity to a change in another variable. In economics, refers the degree to which individuals (consumers/producers) change their demand/amount supplied in response to price or income changes.

(Frank Knight and Peter Drucker) in terms of risk-taking. is willing to put his or her career and financial security on the line and take risks in the name of an idea, spending time as well as capital on an uncertain venture.

a state where economic forces such as supply and demand are balanced and in the absence of external influences the values of economic variables will not change.

is the practice where by a bank accepts deposits, makes loans or investments, and holds reserves that are a fraction of its deposit liabilities. Reserves are held at the bank as currency, or as deposits in the bank's accounts at the central bank.

prices for goods and services are set freely by the forces of supply and demand and are allowed to reach their point of equilibrium without intervention by government policy, and it typically entails support for highly competitive markets and private ownership of productive enterprises.

that all resources used for production should contribute to the maximum satisfaction of society's material wants. implies that there is productive efficiency in which the goods and services society desires are being produced in the least costly way, and allocative efficiency in which resources are devoted to the production of goods and services society most highly values. As a society, our resources - land, labor, capital and entrepreneurship - are insufficient to produce all the goods and services we might desire. In other words, society faces a scarcity of resources

an economic principle that states: "When a government overvalues one type of money and undervalues another, the undervalued money will leave the country or disappear from circulation into hoards, while the overvalued money will flood into circulation."

the skills, knowledge, and experience possessed by an individual or population, viewed in terms of their value or cost to an organization or country.

is a situation in which the distribution of resources between alternatives does not fit with consumer taste (perceptions of costs and benefits).

are the various theories about how in the short run, and especially during recessions, economic output is strongly influenced by aggregate demand (total spending in the economy). 1930s in an attempt to understand the Great Depression. advocated increased government expenditures and lower taxes to stimulate demand and pull the global economy out of the Depression. Subsequently, was used to refer to the concept that optimal economic performance could be achieved - and economic slumps prevented - by influencing aggregate demand through activist stabilization and economic intervention policies by the government. is considered to be a "demand-side" theory that focuses on changes in the economy over the short run.

states that as the quantity of one factor is increased, keeping the other factors fixed, the marginal product of that factor will eventually decline

manufacturing: is a business model and collection of tactical methods that emphasize eliminating non-value added activities (waste) while delivering quality products on time at least cost with greater efficiency. management: is an approach to running an organization that supports the concept of continuous improvement, a long-term approach to work that systematically seeks to achieve small, incremental changes in processes in order to improve efficiency and quality. operations: is all about adding value and removing waste. is a management strategy that seeks to improve operational performance in terms of customer satisfaction, cost, quality, and delivery by focusing on the customer and eliminating waste, variability and inflexibility.

is the additional satisfaction or utility that a person receives from consuming an additional unit of a good or service. is the maximum amount they are willing to pay to consume that additional unit of a good or service.

is the change in the total cost that arises when the quantity produced is incremented by one unit, that is, it is the cost of producing one more unit of a good. at each level of production includes any additional costs required to produce the next unit.

is the additional satisfaction a consumer gains from consuming one more unit of a good or service. is an important economic concept because economists use it to determine how much of an item a consumer will buy.

is the minimum hourly wage an employer can pay an employee for work. Currently, the federal wage is $7.25 an hour (part of the Fair Labor Standards Act) and some states and cities have raised their wage even higher than that.

an economic system combining private and public enterprise. Economies ranging from the United States to Cuba . The term is also used to describe the economies of countries which are referred to as welfare states, such as Norway and Sweden.

the increase in final income arising from any new injection of spending. The size of the multiplier depends upon household's marginal decisions to spend, called the marginal propensity to consume (mpc), or to save, called the marginal propensity to save (mps).

When additional units of a variable factor reduce total output, given constant quantities of all other factors, the company experiences negative marginal returns. The range over which additional units of a variable factor reduce total output, given constant quantities of all other factors..

is a field of marketing research that studies consumers' sensorimotor, cognitive, and affective response to marketing stimuli.

the loss of potential gain from other alternatives when one alternative is chosen. "idle cash balances represent an opportunity cost in terms of lost interest"

is a government-imposed price control or limit on how high a price is charged for a product. Governments intend price ceilings to protect consumers from conditions that could make necessary commodities unattainable.

is a situation when the price charged is more than or less than the equilibrium price determined by market forces of demand and supply.

is a hypothetical representation of the amount of two different goods that can be obtained by shifting resources from the production of one, to the production of the other. The curve is used to describe a society's choice between two different goods.

a promotional strategy where businesses attempt to take their products to the customers. The term push stems from the idea that marketers are attempting to push their products at consumers. Common sales tactics include trying to sell merchandise directly to customers via company showrooms and negotiating with retailers to sell their products for them, or set up point-of-sale displays. Often, these retailers will receive special sales incentives in exchange for this increased visibility.

takes the opposite approach. The goal of pull marketing is to get the customers to come to you, hence the term pull, where marketers are attempting to pull customers in. Common sales tactics used for pull marketing include mass media promotions, word-of-mouth referrals and advertised sales promotions. From a business perspective, pull marketing attempts to create brand loyalty and keep customers coming back, whereas push marketing is more concerned with short-term sales.

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.

a form of unemployment caused by a mismatch between the skills that workers in the economy can offer, and the skills demanded of workers by employers (also known as the skills gap).

1.a sum of money granted by the government or a public body to assist an industry or business so that the price of a commodity or service may remain low or competitive. "a farm subsidy" 2.historical a parliamentary grant to the sovereign for state needs.

A tax imposed on imported goods and services. are used to restrict trade, as they increase the price of imported goods and services, making them more expensive to consumers. A specific tariff is levied as a fixed fee based on the type of item

was popularized by the renowned economist John Maynard Keynes. It states that individuals try to save more during an economic recession, which essentially leads to a fall in aggregate demand and hence in economic growth.

is an original economic system in which traditions, customs, and beliefs shape the goods and the services the economy produces, as well as the rules and manner of their distribution. It's very useful in all countries to provide goods for others.

The velocity of money is the frequency at which one unit of currency is used to purchase domestically- produced goods and services within a given time period. In other words, it is the number of times one dollar is spent to buy goods and services per unit of time.