Economics Class

Price Elasticity =

% change in quantity demanded/ % change in price.

Unitary Elastic =

% of change in quantity demanded= % of change in price.

Contestible Market

A Market that is subject to entry if economic conditions change.

Transaction Account (T.A)

A bank account that permits direct payment.

Natural Monopoly

A business that sets out not to become a monopoly but is a monopoly.

Deflation

A decrease on the average price we pay for goods and services.

Competitive firm

A firm that doesn't have market power. It can't alter the prices of the goods that it sells.

Market Power

A firm that has market power, has the ability to alter the prices (monopolize) it charges for goods and services.

Progressive Tax

A tax that increases as your income increases.

Regressive Tax

A tax whose percentage rate decreases w/ the money you make.

Labor Force

Anyone who is atleast 16 years of age working, or looking for work.

Socio Psychiatric Explanation for Buying

Are desires arise from the following three needs: 1. Social Acceptance 2. Security 3. Ego Gratification

Private Cost

Cost that is paid for by an individual.

Macro-Economics

Economy as a whole.

Micro-Economics

Economy at a merlicular perspective.

Reserve Ratio =

Bank reserves/ Total bank deposits.

Marginal Propensity to Consume (M.P.C)

That fraction or that part of each additional dollar of disposable income that is spent on consumption.

Demand

The ability and willingness to buy quantity of goods and services at different prices and different times.

Supply

The ability and willingness to sell quantity of goods and services.

Marginal Propensity to Save (M.P.S)

The fraction of each additional dollar of disposable income that is not spent on consumption.

Emission Charges / Taxes

The government charges you to pollute.

Government Intervention

The government chooses too.

Government failure

The government gets involved in the economy, & it doesn't help.

In-Kind Income

The government gives people something that they may otherwise have to buy themselves.

Fiscal Policy

The government spends or doesn't spend money in the economy.

Near money

Money that we have access too.

Real Gross Domestic Product (R.G.D.P)

The inflation adjusted gross domestic product.

Human Capital

The knowledge and the skills of the work force.

Relative Price

The price of one good in comparison to another.

Law of Demand

The quantity of a good demanded in a good time period increases while prices decrease.

Law of Supply

The quantity of a good supply in a given time period increases as its prices increases.

Trade Deficits

We are buying more goods from other countries than they are buying from us.

Competitive Profit Maximization Rule

We produce at the rate of out-put where price is the equal to marginal cost.

Price

What a business charges.

Investment Decisions

What we want to do to buy facilities , etc.

Consumer Good

Those good & Services that are designed primarily for the consumer. 2/3 G.D.P.

Per Capita G.D.P=

Total G.D.P / Total Population (Divide the total output by the amount of people).

Profit =

Total Revenue - Total cost.

Aggregate Demand

Total amount of a good demanded available at different prices and at different times.

Market Supply of Labor

Total amount of labor the workers are willing to supply at different wages.

Aggregate Supply

Total supply available at different prices and at different times.

Equilibrium Wage

Wage at which the amount of labor supplied in a given time period equals the quantity of labor demand.

Market Structure

# of firms and their size given in a industry.

Unemployment Rate =

# of unemployed people/ Size of the labor force.

Imperfect Competition

1. Duopoly - Two companies supply a product. 2. Oligopoly - Few large firms that supply all or most of the product. 3. Monopolistic Competition - Have many firms that supply the same product but you have brand loyalty.

3 Types of Consumer Goods

1. Durable Goods- Products that when we buy them, expect them to last several years. 2. Non- Durable Goods- Items that we buy frequently & usually don't put a lot of thoughts in them. 3.Services- Intangible Goods

2 types of markets

1. Factor Market- Where the factors of production are bought and sold. 2. Product Market- Finished businesses are brought and sold.

Different Types of Costs

1. Total cost- market value of all the resources used to produce a good on service. 2. Fixed costs - Costs that doesn't change. 3. Variable Costs - Change from month to month. 4. Average Costs - Total cost / Total output. 5. Marginal Costs - (MC)= Change in total cost / Change in Total output Increase in total cost associated with an additional unit increase in production. 6. Accounting costs. 7. Economic - The value of resources to use the goods and services.

Effects of the minimum wage

1.Reduce Quantity of labor demand . 2. Increase the quantity of labor supply. 3. Creates a market surplus. 4. Some workers end up better than others.

Multiplier =

1/ 1-M.P.R

Legal Minimum Wage

1938 was the first legal minimum wage created by congress which was 25 cent an hour.

Substitute Goods

A good that substitutes for each other.

Disposable Income

All the money you have left over after you pay your taxes.

Consumption Possibilities

All those goods we consume.

Production Possibilities

All those things we can produce w/ the resources we have.

Total Utility

Amount or satisfaction we get from consuming the entire product.

Mixed Economy

An economy where the government has certain rules & regulations to allow.

Inflation

An increase on the average price we pay for goods and services.

Cetris Paribus

Assumption that nothing else is changing.

Complimentary Goods

Frequently consumed w/ other goods.

Budget Surplus

Bringing or making more money than you spend.

Carat Emptor

Buyer Beware

G.D.P Growth Rate

Change in the R.G.D.P/ Base period G.D.P.

Marginal Physical Production (M.P.P) =

Change in total output/ Change in input quantity.

Marginal Utility =

Change in total utility/ Change in quantity consumes.

Recession

Decline in the economy for 2 or more consecutive years.

International Trade

Doing business w/ other countries.

G.N.P

Domestic trade only

Long Run

Expanded capacity.

Investment Goods

Expenditures of production on productions of new plant equipment or capital over a period of time.

Trade Surplus

Export more goods than we import.

Net export =

Export-Imports

Consumer Price Index (C.P.I)

Government monitors our goods and services.

Laissez faire

Hands off approach to the economy.

Opportunity wage

Highest wage an individual worker can earn in his or her best alternative job.

Business Cycle

Illustrates our economy

Unemployment

In ability to find work.

Nominal Income

Income in current dollars.

Short Run

Increased capacity utilization.

Real Income

Inflation adjusted income.

G.D.P

International trade.

Market Failure

Market fails to read the signals in the market place.

Production Function

Max quantity of a good or service you can get from different combination of factor inputs.

Optimal Mix of Output

Most desire mix of output, you can get from the resources you have.

Monopoly

One business controls the entire market share.

Exchange Rates

One countries currency in terms of another.

Productivity

Output/ Unit Input.

Total Revenue =

Price * Quantity sold. (Money that you are taking in for the amount of items you sold.

Equilibrium Price

Price at which the quantity of a good demanded in a given time period equals the quantity of that good supply.

Price Inelastic

Price has no, or very little effect on the demand.

External Cost =

Social cost - Private cost

External Shock

Something disrupts the economy from outside the economy.

Internal Shock

Something happens w/in the economy, that disrupts the economy.

Import

Something that is made in another country.

Export

Something that is manufactured in this country & sent out to other countries.

Budget deficit

Spending more money than you are making.

Equilibrium

Supply curve and the demand curve intercept.

Barter

The direct exchange of one good for another w/out the use of money.

Price Floors

The lowest you can legally charge for a good or a service.

Law of Diminishing Returns

The marginal physical product of a variable input declines as more as it is employed w/a given quantity of other fixed inputs.

Law of Diminishing Marginal Utility

The marginal utility of a good or service declines as more of it is consumed in a given time period.

Wrong mix of output

The market/Government fails to signal things that people don't want.

Price Ceilings

The maximum you can legally charge for a good or service.

Gross National Product (G.N.P.)

The total market value of all the goods and services produce by a nation & sold in that nation.

Gross Domestic Product (G.D.P.)

The total market value of all the goods produce & sold.

Government Monetary Policy

The use of money and credit controls in the economy.

Utility

The want satisfying power of a good or service.

Labor Supply

The willingness and the ability to work a specific amount of time at different prices in a given time period.

Full Employment

Unemployment rate of 5% or less.

Economic Bust

When the economy drops by 5% or more.

Economic Boom

When the economy's doing well. 5% or greater of growth in the R.G.D.P

Income Transfers

When the government transfers $$ to the people not included w/ government services.

Economic Growth

When there is an increase in the real gross domestic product from one year to the next.

Production Decisions

When we decide what it is that we want to do.

Mechanisms of choice

conflicts & trade offs made w/ every economic decisions.