Economics Final Exam Review_2019

CHANGE IN QUANTITY DEMANDED

MOVEMENT ALONG THE DEMAND CURVE showing that the amount someone is willing to purchase changes when the price changes. Due to change in price.

nonprofit organization

Institution that functions much like a business, but does not operate for the purpose of generating profits

factors of production

land, labor, and capital; the three groups of resources that are used to make all goods and services

multinational corporation (MNC)

large corporation that produces and sells its goods and services throughout the world

collective

large farm leased from the state to groups of peasant farmers

zoning law

law in a city or town that designates separate areas for residency and for business

law of increasing costs

law that states that as we shift factors of production from making one good or service to another, the cost of producing the second item increases

public disclosure laws

laws requiring companies to provide full information about their products

antitrust laws

laws that encourage competition in the marketplace

economic rights

legal equality, private property, free contract, voluntary exchange, competition

differentiation

making a product different from other similar products

factor market

market in which firms purchase the factors of production from households

fringe benefits

payments to employees other than wages or salary

self interest

personal gain; the motivating force in a free market economy

goods

physical objects such as clothes or shoes

economic security

protection from adverse economic events

profit motive

the desire to make a profit

competition

the struggle among producers for the dollars of consumers

economics

the study of how people seek to satisfy their needs and wants by making choices

Utility

the usefulness or satisfaction one gets from consumption

cost

to an economist, the alternative that is given up because of a decision

Complements

two goods that are bought and used together

inferior goods

Goods for which demand tends to fall when income rises.

sole proprietorship

a business owned and managed by a single individual

supply schedule

a chart that lists how much of a good a supplier will offer at different prices

business cycle

a cycle or series of cycles of economic expansion and contraction.

bond

a formal contract to repay borrowed money with interest at fixed intervals

cartel

a formal organization of producers that agree to coordinate prices and production

unemployment insurance

a government program that partially protects workers' incomes when they become unemployed

TANF

a government program that provides cash assistance for low-income families

supply curve

a graph of the quantity supplied of a good at different prices

production possibilities curve

a graph that shows alternative ways to use an economy's resources

demand curve

a graphic representation of a demand schedule

interest group

a group of people with common goals who organize to influence government

corporation

a legal entity owned by individual stockholders

patent

a license that gives the inventor of a new product the exclusive right to sell it for a certain period of time

perfect competition

a market structure in which a large number of firms all produce the same product

monopolistic competition

a market structure in which many companies sell products that are similar but not identical

imperfect competition

a market structure that does not meet the conditions of perfect competition

natural monopoly

a market that runs most efficiently when one large firm supplies all of the output

price ceiling

a maximum price that can be legally charged for a good or service

free-rider

a person who receives the benefit of a good but avoids paying for it

guns or butter

a phrase that refers to the trade-offs that nations face when choosing whether to produce more or less military or consumer goods

commodity

a product that is the same no matter who produces it, such as petroleum, notebook paper, or milk

business franchise

a semi-independent business that pays fees to a parent company in return for the exclusive right to sell a certain product or service in a given area

price war

a series of competitive price cuts that lowers the market price below the cost of production

shortage

a situation in which a good or service is unavailable

market failure

a situation in which a market left on its own fails to allocate resources efficiently

horizontal merger

the combination of two or more firms competing in the same market with the same good or service

vertical merger

the combination of two or more firms involved in different stages of producing the same good or service

open opportunity

the concept that everyone can compete in the marketplace

public interest

the concerns of the public as a whole

elasticity of demand

a measure of how consumers respond to price changes

minimum wage

a minimum price that an employer can pay a worker for an hour of labor

government monopoly

a monopoly created by the government

articles of partnership

a partnership agreement

rent control

a price ceiling placed on rent

transition economy

an economy once centrally planned that is changing to a market economy

business organization

an establishment formed to carry on commercial enterprise

poverty threshold

an income level below that which is needed to support families or households

social security

federal program of disability and retirement benefits that covers most working people

negative externality

harmful side effect that affects an uninvolved third party

assets

money and other valuables belonging to an individual or business

land

natural resources that are used to make goods and services

business association

nonprofit organization that promotes collective business interests for a city, state, or other geographical area, or for a group of similar businesses

trade association

nonprofit organization that promotes the interests of a particular industry

professional organization

nonprofit organization that works to improve the image, working conditions, and skill levels of people in particular occupations

demand

the desire to own something and the ability to pay for it

laissez faire

the doctrine that government should not interfere in business

labor

the effort that people devote to a task for which they are paid

start-up costs

the expenses a firm must pay before it can begin to produce and sell goods

socialism

the factors of production are owned by the public and operate for the welfare of all

economic equity

the fairness with which an economy distributes its resources and wealth

liability

the legally bound obligation to pay debts

surplus

A situation in which quantity supplied is greater than quantity demanded

price floor

a minimum price for a good or service

cash transfer

direct payments of money to eligible poor people

normal goods

(superior goods) a good that consumers demand more of when their incomes increase

stock

A certificate of ownership in a corporation

merger

Combination of two or more companies into a single firm

supply

The amount of goods available

franchise

The right to sell a good or service within an exclusive market

Economic question answered by basic social values and goals

Who consumes

Ceteris Paribus

a Latin phrase that means "all other things held constant"

cooperative

a business organization owned and operated by a group of individuals for their mutual benefit

partnership

a business organization owned by two or more persons who agree on a specific division of responsibilities and profits

demand schedule

a table that lists the quantity of a good a person will buy at each different price

excise tax

a tax on the production or sale of a good

nonprice competition

a way to attract customers through style, service, or location, but not a lower price

Uniform Partnership Act (UPA)

act ordering common ownership interests, profit and loss sharing, and shared management responsibilities in a partnership

positive externality

beneficial side effect that affects an uninvolved third party

conglomerate

business combination merging more than three businesses that make unrelated products

Law of Demand

consumers buy more of a good when its price decreases and less when its price increases

service cooperative

cooperative that provides a service, rather than a good

closely held corporation

corporation that issues stock to only a few people, often family members

publicly held corporation

corporation that sells stock on the open market

thinking at the margin

deciding whether to do or use one additional unit of some resource

elastic demand

demand in which changes in price have large effects on the amount demanded

inelastic demand

demand in which changes in price have little or no effect on the amount demanded

disequilibrium

describes any price or quantity not at equilibrium; when quantity supplied is not equal to quantity demanded in a market

price discrimination

division of customers into groups based on how much they will pay for a good

free enterprise

economic system that operates free of government interference

economies of scale

factors that cause a producer's average cost per unit to fall as output rises

consumer cooperative

retail outlet owned and operated by consumers

Marginal utility

satisfaction or usefulness obtained from acquiring one more unit of a product

equilibrium

the point at which quantity demanded and quantity supplied are equal

diminishing marginal utility

the principle that our additional satisfaction, or our marginal utility, tends to go down as more and more units are consumed

deregulation

the removal of some government controls over a market

human capital

the skills and knowledge gained by a worker through education and experience

physical capital

the stock of equipment and structures that are used to produce goods and services

privatize

to transfer the ownership of factories from the government to individual citizens

variable

A factor that can change

medicare

A federal program of health insurance for persons 65 years of age and older

license

A government issued right to operate a business

subsidy

A government payment that supports a business or market

monopoly

A market in which there are many buyers but only one seller.

Oligopoly

A market structure in which a few large firms dominate a market

consumer

A person who purchases goods and services for personal use

producer

A person, company, or country that makes, grows, or supplies goods or commodities for sale

medicaid

A public assistance program designed to provide healthcare to poor Americans.

Three economic Questions

What to produce, how to produce, for whom

macroeconomics

Concentrates on the operation of a nation's economy as a whole.

Income causes a Change in Demand

DEMAND CURVE SHIFTS TO RIGHT: When income increases, consumers buy more product at each and every price. DEMAND CURVE SHIFTS TO LEFT: When income decreases, consumers buy less of good at each and every price.

CHANGE IN DEMAND

SHIFT OF THE DEMAND CURVE when people buy different amounts at every price results in a NEW CURVE or NEW DEMAND. A shift to the right shows an increase in demand. A shift to the left shows decrease in demand.

Taste causes a Change in Demand

Taste due to advertising, trends, seasons. SHIFT TO THE RIGHT: If a product is advertised, it increases popularity and people buy more at each and every price. SHIFT TO THE LEFT: If people get tired of a product, they buy less at each and every price.

law of supply

Tendency of suppliers to offer more of a good at a higher price

microeconomics

the branch of economics that studies the economy of consumers or households or individual firms

Economic system

The method used by a society to produce and distribute goods and services

dividend

The portion of corporate profits paid out to stockholders

gross domestic product

The sum total of the value of all the goods and services produced in a nation

services

actions or activities that one person performs for another

producer cooperative

agricultural marketing cooperative that helps members sell their products

entrepreneur

ambitious leader who combines land, labor and capital to create and market new goods and services

Quantity Supplied (Qs)

amount that sellers are willing and able to sell at a specific price.

price fixing

an agreement among firms to charge one price for the same good

collusion

an agreement among firms to divide the market, set prices, or limit production

traditional economy

an economic system in which custom decides what people do, make, buy, and sell

centrally planned economy/communism

an economic system in which the government makes all decisions on the three key economic questions

want

an item that we desire but that is not essential to survival

barrier to entry

any factor that makes it difficult for a new firm to enter a market

capital

any human-made resource that is used to produce other goods and services

business license

authorization to start a business issued by the local government

three indicators of economic stability

full employment, economic growth, stable prices

in-kind benefits

goods and services provided for free or at greatly reduced prices

substitutes

goods used in place of one another

public goods

goods whose benefits cannot be limited and that are available to all

regulation

government intervention in a market that affects the production of a good

workers' compensation

government program that extends payments for medical care to workers injured on the job

income effect

the change in consumption resulting from a change in real income

deteriminants of demand

income, consumer expectation, population, consumer taste, price of complements, price of substitutes

heavy industry

industry that requires a large capital investment and that produces items used in other industries

certificate of incorporation

license to form a corporation issued by state government

trust

like a cartel, an illegal grouping of companies that discourages competition

scarcity

limited quantities of resources to meet unlimited wants

market supply schedule

lists how much of a good or service all producers in a market are willing and able to offer for sale at each price

limited liability partnership (LLP)

partnership in which all partners are limited partners

limited partnership

partnership in which only one partner is required to be a general partner

general partnership

partnership in which partners share equally in both responsibility and liability

Economic concept necessitating choices

scarcity

predatory pricing

selling a product below cost to drive competitors out of the market

royalty

share of earnings given as payment

need

something like air, food, or shelter that is necessary for survival

economic growth

steady growth in the productive capacity of the economy (and so a growth of national income)

invisible hand

term economists use to describe the self-regulating nature of the marketplace

market power

the ability of a company to change prices and output like a monopolist

economic freedom

the ability of people to make their own economic decisions without interference from the government

trade-off

the alternatives that we sacrifice when we make a decision

shortage

the amount by which quantity demanded exceeds quantity supplied

production possibilities frontier

the line on a production possibilities graph that shows the maximum possible output

product market

the market in which households purchase the goods and services that firms produce

opportunity cost

the most desirable alternative given up as the result of a decision

private sector

the part of the economy that involves the transactions of individuals and businesses

public sector

the part of the economy that involves the transactions of the government

unit elastic demand

the percentage change in quantity demanded equals the percentage change in price; the resulting price elasticity has an absolute value of 1.0

underutilization

using fewer resources than an economy is capable of using

efficiency

using resources in such a way as to maximize the production of goods and services

Substitution effect

when consumers react to an increase in a good's price by consuming less of that good and more of other goods

economic efficiency

wise use of available resources so as to obtain the greatest benefits possible