Mother of all study guides Econ EOCT – Flashcards
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Needs are things you need to live & Wants are things you want for entertainment
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What are needs and wants?
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Goods are physical (tangible) objects such as clothes or shoes. Services are Actions or activities one person performs for another.
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What are goods and services?
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We have limited quantities of resources to meet unlimited wants.
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What is scarcity?
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Resources are land, labor, capital, and entrepreneurship. We have unlimited wants but limited resources. and scarcity? The condition that results from society not having enough resources to produce all the things people would like to have (want).
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What are resources and how do they relate to goods and services?
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Economics is the study of the production, distribution, and consumption of goods and services, and the study of money.
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What is economics?
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the cost spent on making a product that sales for a higher price
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What is opportunity cost? How is it different from a trade-off?
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what? how? for who?
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What are the three basic economic questions?
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Land, Labor, Capital, Entrepreneurship
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What are the four factors of production? What is the payment for each?
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A financial gain made in a transaction
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What are profits?
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A numerical or mathematical expression of a relationship between inputs and outputs. It shows units of total product as a function of units of inputs
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What is a production possibilities curve and what does it show?
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Resources used efficiently
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How do you explain a point that is inside the production possibilities curve?
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Inefficient use of resources (recession/depression)
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How do you explain a point that is outside the production possibilities curve?
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the amount of consumers
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What would cause the production possibilities curve to shift right? Left?
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When people, businesses, and/or nations concentrate on goods and services that they can produce better and faster than anyone else.
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What is specialization?
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profit
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What happens when the marginal benefit is equal or exceeded by the marginal cost?
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Command economy - government answers the questions; mixed economy - supply and demand; market - individuals answer the questions.
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How are decisions about the allocation of resource made in each system?
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an economic system where private citizens own and use production to seek profit.
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What is Capitalism? Which economic system is it closest to?
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sole proprietorship
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What system(s) have lots of competition?
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Limited liability - the corporation is responsible for the debt; in the event the corporation is sued, it is the corporation sued and not individuals) which types of business organization have unlimited liability? Unlimited liability - sole proprietorship
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Compare limited and unlimited liability. Which types of business organization have unlimited liability?
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Corporations have unlimited life; sole proprietors and partnerships have limited life.
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Compare limited life and unlimited life. Which organization(s) has unlimited life?
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corporation
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Which type of organization is the hardest to start?
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Partnership
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Which type of organization is the easiest to start?
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suppliers offer more for sale at higher prices
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Explain the Law of Demand.
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A table of prices and quantities that are demanded at those prices
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What is a demand schedule?
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is how much more (less) you can buy of everything due to a price decrease (increase)
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What is the income effect?
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When Prices change from one year to another (not proportioned), and people buy more of a good of a price that has fallen while they buy less of a good of a price that rises. Ignores substitution possibility and overstates living costs gradually each year.
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What is substitution effect?
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The degree to which a demand or supply curve reacts to a change in price is the curve's elasticity. An economic term used to describe the situation in which the supply and demand for a good are unaffected when the price of that good or service changes.
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What is elastic and inelastic?
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cost of input, technology/productivity, expectations, government regulations, taxes/subsidies, number of suppliers.
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What are the determinants of Demand?
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A the price of a product rises, the quantity supplied of the product will usually increase, ceteris paribus
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Explain the Law of Supply.
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Price of resources, Government tools, a. taxes, b. subsidies, c. regulations, 3. technology, 4. competition, 5. price of related goods, 6. producer expectations
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What are the determinants of supply?
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The price marked by equilibrium point on supply and demand graph. At this price supply and demand are in balance, it is the MARKET-CLEARING PRICE: because at this price the market will be cleared of all surpluses and shortages
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What is the equilibrium point?
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Maximum price for a particular good; good for the consumer; side effect: shortage
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What are price ceilings and what can they create? Give one example.
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Minimum price for a good; protects the producer; side effect: surplus
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What are price floors and what can they create?
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marginal cost = marginal revenue
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What is the point of profit maximization?
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many competitors; identical product
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What is Perfect Competition?
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many firms sell similar but not identical products
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What is Monopolistic Competition?
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Market dominated by a few large suppliers
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What is an Oligopoly?
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When a person or group has complete control of a market.
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What is a Monopoly?
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monopoly has highest barrier to entry, oligopoly would be next, then monopolistic competition, and last would be pure competition.
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Rank the market structures in order of number of firms.
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Most competitive is perfect competition, then monopolistic competition, oligopoly and then monopoly.
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Rank the market structures in order of level of competition.
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Perfect competition, monopolistic competition, oligopoly and monopoly.
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Rank the market structures in order of barriers to entry.
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Monopoly, Oligopoly, monopolistic competition, perfect competition.
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Rank the market structures in order of product differentiation.
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perfect competition, monopolistic competition, oligopoly, and monopoly
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Rank the market structures in order of influence over price.
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Product differentiation is a strategy whereby companies attempt to gain competitive advantage by offering value that is not available in other products or services.
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What is product differentiation?
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it protects investors
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What are Anti-Trust Acts?
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A good or service whose consumption by one person does not exclude consumption by others
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What is a public good?
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proportional, progressive, regressive
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What are the three types of taxes?
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Proportional tax
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What type of tax is a sales tax on food?
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Proportional
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What type of tax is the personal income tax?
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progressive
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What type of tax is the property tax?
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Federal income tax
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What tax is the most important to the Federal Government?
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Sales Tax
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What tax is most important to the state governments?
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Property Tax
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What tax is most important to local governments?
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Progressive
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What type of tax would a 6% percent tax on gas be?
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Progressive
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What type of tax would a 10% tax on income be?
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Proportional
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What type of tax would a 10% tax on the income under $10,000; 15% on income between $10,000 and $40,000; and 20% on incomes over $40,000?
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Federal Insurance Contributions Ac
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What is FICA?
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social insurance program for senior citizens.
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What is Social Security?
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federal insurance program for elderly persons or persons with permanent disabilities
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What is Medicare?
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Tax that is withheld from one's paycheck
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What is withholding tax?
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Internal Revenue Service - Agency responsible for collecting Federal Income Tax
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Who is the IRS?
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when Americans spent more money than the taxes raised
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What is deficit
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main characteristics of debt are that it must, at some point, be repaid, that interest in the amount borrowed must be paid periodically and that the repayment if principal and interest is not contingent on the success of the business
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What is debt
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when tax revenues of the government are transferred to households, businesses, and state/local government
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What is a transfer payment?
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it is used to trade for other goods and services
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What are the functions of money?
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how we measure the amount of money in an economy: money supply(M1) coins bills checks and travelers checks
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What is the money supply? How do banks make the money supply grow?
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Policies that control the supply of money, the price of money, and the availability of credit.
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What is monetary policy?
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Open Market Operations, Reserve Requirement, and the Discount Rate
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List the three tools of monetary policy?
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GDP includes all final goods produced within a country in a year.
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What goods are included in GDP?
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The value of final goods and services evaluated at current-year prices
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What are Nominal GDP
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Decline in production, employment, and income
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What is a recession?
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A very long and severe recession.
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What is a depression?
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-Slow economic growth and rising price
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What is stagflation?
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decreases
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What happens to unemployment at each stage of the business cycle?
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Exports increase so GDP increases, AD increases
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What happens to GDP at each stage of the business cycle?
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CPI is a measure of the average change over time in prices paid by urban consumers for a market basket of consumer goods and services
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What is a CPI?
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people with fixed income (except with COLAs
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Who is hurt by inflation?
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A measure of the average price level in an economy.
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What is a price index
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a sustained rise in the price level caused by a leftward shift of the aggregate supply curve
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What is cost-push inflation?
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When demand outpaces the economy's ability to produce goods ; services.
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What is demand-pull inflation?
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-Purchasing power risk
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What is inflation risk?
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level of employment where there is no cyclical unemployment
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What is full employment?
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The aggregate supply curve shows the positive relationship between the price level and the amount of output that a country's industries will supply
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What does the Aggregate Supply curve represent?
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determines the quantity of labor hours employed and the quantity of real GDP supplied
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What does the Aggregate Demand Curve represent?
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consumers
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What events cause aggregate supply shift?
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consumer income
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What events cause aggregate demand to shift?
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government power to tax and spend
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What is fiscal policy?
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1. decrease in taxes, for the poor, more likely to spend that money than save it. rich more likely to spend it
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What are automatic stabilizers?
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Advantage in efficiency in producing a good over another country.
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What is absolute advantage?
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The ability to make something at a lower opportunity cost than other producers face
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What is comparative advantage?
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Increased marginal product of labor
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What do we gain from trade?
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Someone who favors trade barriers to reduce the amount of foreign competition.
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What is a protectionist trade policy?
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Import taxes
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What are tariffs?
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setting a limit on how many units of a certain product can be exported or imported.
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What are quotas?
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Standards are formal, detailed instructions that can be described, measured, and achieved. They provide a mark for performance to assess how a specific task has been executed.
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What are standards?
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A ban on exporting products to other countries
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What is an embargo?
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Grants of money given to people to help them start a business and create exports (to increase the wealth of the country.
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What are subsidies?
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The goods trade exports-imports in the Current account
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What is the balance of payments?
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occurs when your country imports more than they export
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What is a trade deficit?
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North American Free Trade Agreement
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What is NAFTA?
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The Association of Southeast Asian Nation (ASEAN) is an association of nations dedicated to economic and political cooperation in Southeast Asia countries.
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What is ASEAN?
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European Union
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What is the EU?
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The value of one currency expressed in another currency
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What is an exchange rate?
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the value of the dollar is less than that of other countries, foreign goods are more expensive
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weak dollar
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the value of the dollar is more than that of other countries, foreign goods are less expensive
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strong dollar
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portion of bill patient is required to pay each year
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What is a deductible?
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this increases with your ability to pay loans back
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What is a credit score?
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Is a federally regulated cooperative financial institution that is owned and controlled by its members and operated for the purpose of providing banking services at a competitive rate
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What is a Credit Union?
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money that has been saved over time and money that is given by a bank
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Savings and Loans?
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Businesses that specialize in making small or personal loans
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Consumer Finance Company?
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When you risk more the more money you can make
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What does "the greater the risk, the greater the return" mean?
