Intro to Economics – Flashcards
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type of economics that looks at specific units of the economy
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microeconomics
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type of economics that looks at the big picture
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macroeconomics
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economics is defined as how ___ uses ___ resources to satisfy ___ wants
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society; limited; unlimited
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the study of economics can be defines as ___
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scarcity
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due to scarcity, society must make a ___ or ___-___
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choice; trade-off
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the word marginal means ___
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additional
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the cost of the next best alternative
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opportunity cost
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the model used to show opportunity costs
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PPC
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society is comprised of four main groups
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consumers, producers, government, foreign
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individuals who use goods and services to satisfy their needs and wants (aka households)
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consumers
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using up goods and services to satisfy individual's needs and wants
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consumption
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using up goods and services to impress others; fluctuates with the economy; ex. watches, purses, new technology
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conspicuous consumption
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when you spend money on something, producers know consumers want it (you vote for products with your dollars)
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dollar votes
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consumers have the power to decide what's produced through dollar votes
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consumer sovereignty
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the business dies with the owner(s)
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limited life
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you have the potential to lose everything
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unlimited liability
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partnership with corporate benefits (limited liability corporation)
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LLC
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one person
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sole proprietorship
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generally small businesses; limited life; unlimited liability
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sole proprietorship
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more of these than any other type of business structure because it's easy to start and quit
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sole proprietorship
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don't share profit; no special taxes
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sole proprietorship
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2+ people; unlimited liability; limited life; no special taxes
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partnership
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not advisable because you can take the fall if the other person messes up
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partnership
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has stocks, so it's owned by stockholders (ex. Apple)
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public corporation
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no stocks, so it's owned by founders (ex. SC Johnson)
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private corporation
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independent being
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entity
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limited liability for owners; unlimited liability for entity
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corporation
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unlimited life; easier for them to hire because stability
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corporation
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more government regulation and taxes than other business structures
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corporation
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corporation pays taxes, and so do the individuals on the same money
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double taxation
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government must approve all mergers to ___ ___
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prevent monopolies
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type of merger involving two companies in the same industry (ex. Office Depot and Office Max)
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horizontal
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merger for the sake of efficiency
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horizontal
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type of merger involving two companies from different industries (ex. Pepsi and Frito Lay)
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vertical
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merger for the sake of diversification
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vertical
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when a large company buys a small company (ex. Disney bought Marvel)
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acquisition
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3+ mergers (usually vertical) (ex. Disney and all of it's little movie companies)
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conglomerate
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business that doesn't seek profit, but rather to help the community (ex. YMCA, Goodwill, school, church)
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non-profit
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no taxes on revenue or profit
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non-profit
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4 factors of production (aka limited resources or inputs)
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land; labor; capital; entrepreneurship
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all natural resources (water, oil, coal)
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land
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people's efforts, abilities, and skills
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labor
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a tool, equipment, or factory used in the method of production
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capital
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risk taker in search of profit
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entrepreneurship
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what do we call money in economics?
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financial capital
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an organized way of providing for the needs and wants of society
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economic system
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3 basic economic questions
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What to produce, how to produce it, and for whom?
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no countries have this economic system anymore
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traditional
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type of economic system that is based on the past and heritage (family), very stable
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traditional
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type of economic system that is a hunter-gatherer society in which roles are based on gender
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traditional
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3 examples of past traditional systems
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Amish, inuits, aborigines
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who makes decisions in traditional economy?
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the chief and tribal council
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type of economic system that has little or on technology
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traditional
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type of economic system that provides limited choices
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traditional
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type of economic system in which the government is in control
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command
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examples of a command economy
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North Korea and Cuba
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type of economic system that provides no choices
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command
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type of economic system that is created through quota system (inefficient)
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command
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change in this type of government system happens very quickly
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command
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3 ex of market economies
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USA, Japan, Canada
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type of economic system in which individuals have control and unlimited choices
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market
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type of economic system that has incentives ($, promotions) and the ability to own private property, which is used to build wealth
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market
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type of economic system that has constantly improving technology and intense competition
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market
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what is the benefit of competition?
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higher quality for a lower price
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7 economic goals in the US (5 of them start with economic _____)
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freedom, security, efficiency, equity, growth; full employment, price stability
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cornerstone of our economy; you have the choice to spend or save your money however you want to; have a job or don't; quit or fire employees; own property or don't; hardest to measure
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economic freedom
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"safety net"; unemployment checks, Social Security, disability, worker's comp
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economic security
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productivity of resources prevents waste, which is a concern due to scarcity; ex. timers on lights, hybrids
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economic efficiency
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minimum wage, discrimination in hiring, food labels, credit laws, side effects of medicine, small print on contracts, prevention of monopolies
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economic equity
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what measures economic growth?
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GDP
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economic growth should annually be _____% and we should be in full employment on order to maintain a healthy economy
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3-5
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a general rise in price level, which means the dollar's purchasing power decreases
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inflation
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inflation rate should be 2% or below
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price stability
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creating goods and services; measured by GDP
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production
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efficient use of resources; important bc scarcity
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productivity
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how does productivity increase?
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specialization and increase in human capital
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division of labor among several tasks, like on an assembly line
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specialization
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sum of people's efforts, abilities, and skills
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human capital
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in order to increase human capital, 3 things must also increase
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education, incentives, morale
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on a PPC, a shift ____ demonstrates growth
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right
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2 things needed for economic growth to occur on a PPC
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new technology, increase in quality and quantity of resources
