Honors Economics Final Exam – Flashcards
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Economics
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study of how people and societies use limited resources to satisfy unlimited wants; the management of scarcity and choice
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Resources
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A source or supply or support
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Scarce
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In short supply; not plentiful
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Allocate
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To distribute according to some plan or system
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Opportunity Cost
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Cost of the next best alternative use of money, time, or resources when one choice is made rather than another
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Marginal Cost
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Extra cost of producing one additional unit of production.
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Marginal Benefit
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The additional benefit to a consumer from consuming one more unit of a good or service
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Specialization
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Development of skills in a specific kind of work
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Market
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A group of buyers and sellers of a particular good or service
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Command
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An economic system controlled by strong, centralized government, which usually focuses on industrial goods. With little attention paid to agriculture and consumer goods.
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Mixed
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An economy in which private enterprise exists in combination with a considerable amount of government regulation and promotion.
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Traditional
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An economy in which production is based on customs and traditions and economic roles are typically passed down from one generation to the next.
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Production Possibility Curve
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A graph that describes the maximum amount of one good that can be produced for every possible level of production of the other good
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Microeconomics
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Study of individual consumers and businesses.
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Circular Flow of Goods and Services
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manufacturers--wholesalers--retailers--consumers the movement of goods and services from firms to households, and of resources from households to firms
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Supply
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A stock of a resource from which a person or place can be provided with the necessary amount of that resource.
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Law of Supply
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Tendency of suppliers to offer more of a good at a higher price
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Law of Demand
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consumers buy more of a good when its price decreases and less when its price increases
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Equilibrium Price
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the price that balances quantity supplied and quantity demanded
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Equilibrium Quantity
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The quantity supplied and the quantity demanded at the equilibrium price
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Factors Effecting Price Determination
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Costs of inputs, changes in technology, changes in prices of other goods, substitute goods, complementary goods, changes in income, changes in preference
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Price Floor
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A legal minimum on the price at which a good can be sold
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Price Ceiling
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A legal maximum on the price at which a good can be sold
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Price Elasticity
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A measure of how much the quantity demanded of a good responds to a change in the price of that good, computed as the percentage change in quantity demanded divided by the percentage change in price
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Inelastic
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Describes demand that is not very sensitive to a change in price
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Elastic
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A measure of the responsiveness of quantity demanded or quantity supplied to a change in one of its determinants
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Three Business Organizations
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Sole proprietorship, partnership, corporation
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Sole Proprietorship
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A business owned by one person Ex- A Restaurant
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Partnerships
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Business organizations in which two or more persons share responsibilities, costs, profits, and losses.
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Corporations
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businesses that are owned by many investors who buy shares of stock
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Monopoly
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Number of Firms- one Barriers to entry- very high Products: one Competition- none
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Pure (Perfect) Competition
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Number of Firms- unlimited Barriers to entry- none, or very very little Products: one, similar throughout the market Competition- unlimited
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Monopolistic Competition
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Number of Firms- a large number Barriers to entry- low Products: similar but not exactly alike Competition- Must be aware of their competitor's actions, but can control some of their prices
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Oligopoly
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Number of Firms- few, often between 2-10 Barriers to entry- high Products: varies Competition- All firms are aware of each others prices
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GDP
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Gross Domestic Product- the total market value of all final goods and services produced annually in an economy
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Gross Domestic Product formula
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GDP= (C+I+G+X) Consumer spending+Business investments+Government expenditures+Net Exports (exports-imports)
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Price Index
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A measurement that shows how the average price of a standard group of goods changes over time
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Aggregate Demand
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the amount of goods and services in the economy that will be purchased at all possible price levels
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Aggregate Supply
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the total amount of goods and services in the economy available at all possible price levels
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Recession
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A period of declining real GDP, accompanied by lower real income and higher unemployment.
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Depression
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A long-term economic state characterized by unemployment and low prices and low levels of trade and investment
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Stagflation
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A period of falling output and rising prices
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Inflation
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A continuous rise in the price of goods and services
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Structural Unemployment
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People not having jobs due the change in structure of the industry or firm
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Frictional Unemployment
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A type of unemployment caused by workers voluntarily changing jobs and by temporary layoffs; unemployed workers between jobs.
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Cyclical Unemployment
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laborers lose jobs during an economic downturn
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Deficit
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An excess of federal expenditures over federal revenues.
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National Debt
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the debt of the national government (as distinguished from the debts of individuals and businesses and political subdivisions)
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The Federal Reserve
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The US central bank consisting of 12 regional banks are run by a board of governors appointed by the president for overlapping 14-year terms; formally independent of the executive and congressional branches of government; private bank members of the system own their assets.
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Monetary Policy
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Government policy that attempts to manage the economy by controlling the money supply and thus interest rates.
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Fiscal Policy
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A government policy for dealing with the budget (especially with taxation and borrowing)
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Balance of Trade
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the difference in value over a period of time of a country's imports and exports of merchandise
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Balance of Payments
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A measure of the total flow of money into or out of a country.
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Absolute Advantage
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The ability to produce a good using fewer inputs than another producer
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Comparative Advantage
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The ability of a country to produce a good at a lower cost than another country can.
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Tariff
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A government tax on imports or exports
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Embargo
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A government order imposing a trade barrier
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Standards
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An internationally recognized definition of technical specifications that ensure worldwide consistency.
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Subsidy
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A government payment that supports a business or market
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Exchange Rate
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The measure of how much one currency is worth in relation to another.
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Appreciate
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To increase in value
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Depreciate
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To decrease in value
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Mutual Fund
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a regulated investment company with a pool of assets that regularly sells and redeems its shares
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Bonds
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A certificate issued by a government or private company which promises to pay back with interest the money borrowed from the buyer of the certificate: The city issued bonds to raise money for putting in new sewers.
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Progressive Tax
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A tax in which the average tax rate rises with income. People with higher incomes will pay a higher percentage of their income in taxes.
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Savings
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Disposable income not spent for consumer goods.
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Investment
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A component of aggregate demand, it includes all spending on capital equipment, inventories, and technology by firms. This does not include financial investment, which is the purchase of financial assets (stocks and bonds), not included in GDP because they are only purely financial investments.
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Regressive Tax
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A tax in which the burden falls relatively more heavily on low-income groups than on wealthy taxpayers. The opposite of a progressive tax, in which tax rates increase as income increases.
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Proportional Tax
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A tax by which the government takes the same share of income from everyone, rich and poor alike for example, when a rich family and a poor family both pay 20%.
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Credit Worthiness
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a measure of whether a borrower is able to pay back a loan in a timely manner
