Economics Course Review
market demand curve
a curve that shows how much of a product all consumers will buy at all possible prices
market supply curve
a graph that shows the various amounts offered by all firms over a range of possible prices
supply elasticity
a measure of how the quantity supplied responds to a change in price
elasticity
a measure of responsiveness that shows how one variable responds to a change in another variable
demand elasticity
a measure that shows how a change in quantity demanded responds to a change in price
budget surplus
a positive balance after expenditures are subtracted from revenues
economic model
a simplified version of a complex behavior expressed in the form of an equation, graph, or illustration
supply
amount of a product offered for sale at all possible prices
specialization
assignment of tasks to the workers, factories, regions, or nations that can perform them more efficiently
opportunity cost
cost of the next-best alternative use of money, time, or resources when making a choice
division of labor
division of work into a number of separate tasks to be performed by different workers
Medicare
federal health-care program for senior citizens, regardless of income
social security
federal program of disability and retirement benefits that covers most working people
mandatory spending
federal spending authorized by law that continues without the need for annual approvals by Congress
economic growth
increase in a nation's total output of goods and services over time
market
meeting place or mechanism that allows buyers and sellers to come together
labor
people with all their efforts, abilities and skills
equilibrium price
price where quantity supplied equals quantity demanded
law of supply
principle that more will be offered for sale at higher prices than at lower prices
factors of production
productive resources that make up the four categories of land, capital, labor, and entrepreneurs
inflation
rise in the general level of prices
entrepreneur
risk-taking individual in search of profits
consumer sovereignty
role of consumer as ruler of the market when determining the types of goods and services produced
Law of Demand
rule stating that consumers will buy more of a product at lower prices and less at higher prices
economics
social science dealing with the study of how people satisfy seemingly unlimited and competing wants with the careful use of scarce resources
want
something we would like to have but is not necessary for survival
discretionary spending
spending for federal programs that must receive annual authorization
competition
the struggle among sellers to attract consumers
land
natural resources or other "gifts of nature" not created by human effort
capital
tools, equipment, and factories used in the production of goods and services
national debt
total amount borrowed from investors to finance the government's deficit spending
unit elastic
type of elasticity where a change in price causes a proportional change in quantity demanded
elastic
type of elasticity where a change in price causes a relatively larger change in quantity demanded
inelastic
type of elasticity where a change in price causes a relatively smaller change in quantity demanded
fiscal year
12-month financial planning period that may not coincide with the calendar year
FICA
Federal Insurance Contributions Act; tax levied on employers and employees to support Social Security and Medicare
change in quantity demanded
change in amount demanded for sale when the price changes
change in quantity supplied
change in amount offered for sale when the price changes
utility
ability or capacity of a good or service to be useful and give satisfaction to someone
circular flow of economic activity
after individuals earn their incomes in factor markets, they spend it in product markets; businesses then use this money to produce more goods and services; the cycle of repeats.
federal budget
annual plan outlining proposed expenditures and anticipated revenues
need
basic requirement for survival, including food, clothing, and shelter
benefit principle of taxation
belief that taxes should be paid according to benefits received regardless of income
ability to pay principle of taxation
belief that taxes should be paid according to level of income, regardless of benefits received
demand
combination of desire, ability, and willingness to buy a product
market failure
condition that causes a competitive market to fail
real gross domestic product (GDP)
dollar value of all final goods, services, and structures produced within a country's borders during a one-year period based on a base year's prices
nominal gross domestic product (GDP)
dollar value of all final goods, services, and structures produced within a country's borders during a one-year period based on current year prices
command economy
economic system characterized with a central authority that makes most of the major economic decisions
market economy
economic system in which supply, demand, and the price system help people make decisions and allocate resources
traditional economy
economic system in which the allocation of scarce resources and other economic activities are based on ritual, habit, or custom
modified free enterprise
economy where people carry on their economic affairs freely but are subject to some government intervention and regulation
"there is no such thing as a free lunch"
everything we do has a cost, due to limited resources
scarcity
fundamental economic problem of meeting people's virtually unlimited wants with scarce resources
profit
income less expenses; extent to which persons or organizations are better off financially at the end of a period than they were at the beginning
profit maximizing quantity of output
level of production where marginal cost is equal to marginal revenue
product market
market where goods and services are bought and sold
factor market
market where the factors of production are bought and sold
productivity
measure of the amount of output produced with a given amount of productive factors
change in demand
situation where different amounts are demanded at all possible prices in the market; shift of the demand curve
change in supply
situation where different amounts are offered for sale at all possible prices in the market; shift of the supply curve
surplus
situation where quantity supplied is greater than quantity demanded at a given price
shortage
situation where quantity supplied is less than quantity demanded at a given price
human capital
sum of people's skills, abilities, health, knowledge and motivation
good
tangible economic product that is useful, relatively scarce, and transferable to others
proportional tax
tax in which percentage of income paid in tax is the same regardless of the level of income
regressive tax
tax in which the percentage of income paid in tax goes down as income rises
progressive tax
tax in which the percentage of income paid in tax rises as the level of income rises
public sector
that part of the economy made up of local, state, and federal governments
private sector
that part of the economy made up of private individuals and businesses
service
work or labor performed for someone
