Quick Review

What are the Articles of Partnership

Articles of partnership is a contract that forms an agreement among business partners to pool labor and capital, and share in profit, loss and liability. Such a document acts as a rule book for limited partnerships by outlining all the conditions under which parties enter into a partnership. Articles of partnership may also be referred to as a partnership agreement, especially outside of North America.

The value of all final goods and services sold in a country in 1 year

Gross Domestic Product

What is it called when 2 parties use negotiations where both sides are bound to the 3rd party decision to resolve the conflict?

Mediation is a voluntary process in which an impartial person (the mediator) helps with communication and promotes reconciliation between the parties which will allow them to reach a mutually acceptable agreement. Mediation often is the next step if negotiation proves unsuccessful. Arbitration is the submission of a disputed matter to an impartial person (the arbitrator) for decision.

When several businesses act as if they were one this is known as ____

Mergers

A Union that does not require workers to join the union to be hired or keep their jobs.

Modified Union Shop

The theory of Laissez-Faire economics explains what about the government's role in the economy?

One of the guiding principles of capitalism, this doctrine claims that an economic system should be free from government intervention or moderation, and be driven only by the market forces. Centered on the belief (termed invisible hand by the 18th century Scottish economist Adam Smith) that human beings are naturally motivated by self-interest and, when they are not interfered-with in their economic activities, a balanced system of production and exchange based on mutual benefit emerges. Laissez-faire (French for, allow to pass or let go) economics originated in the 18th century France where economists (then called 'physiocrats') such as Francois Quesnay (1694-1774) and Victor Riqueti-Marquis de Mirabeau (1715-89) became hostile to subsidies and discriminatory economic measures of then prevalent mercantilism. They believed in a bountiful nature and innate goodness of humankind, and asserted that governments should leave the individual alone except when social liberties are infringed. In 19th century, this philosophy became the dominant economic thinking in the Western world. But soon its failings reflected in the great disparity in distribution of wealth, harsh treatment of workers, disregard for consumer safety, and spread of monopolies, became clear. By the mid 19th century, opposition to laissez-faire economics began and governments in all industrialized countries intervened on behalf of workers and general population. Factory laws and consumer protection laws were enacted and growth of monopolies was checked. Early 20th century saw breakup of monopolies in the US and (after Second World War) nationalization of essential industries and services in Europe. Keynesian economics (which advocates government intervention in the national economy) further undermined it, a process spurred by the great depression of 1930s. From 1970's, however, the pendulum swung back to laissez-faire economics (renamed 'market economy' or 'free enterprise') and brought deregulation of business, and progressive removal of trade barriers, which is continuing.

What is being measured in the Business Cycle?

The business cycle is the pattern of expansion, contraction and recovery in the economy. Generally speaking, the business cycle is measured and tracked in terms of GDP and unemployment - GDP rises and unemployment shrinks during expansion phases, while reversing in periods of recession.

What is the added cost of producing one more unit of output (one more good or service)?

The increase or decrease in the total cost of a production run for making one additional unit of an item. It is computed in situations where the breakeven point has been reached: the fixed costs have already been absorbed by the already produced items and only the direct (variable) costs have to be accounted for. Marginal costs are variable costs consisting of labor and material costs, plus an estimated portion of fixed costs (such as administration overheads and selling expenses). In companies where average costs are fairly constant, marginal cost is usually equal to average cost. However, in industries that require heavy capital investment (automobile plants, airlines, mines) and have high average costs, it is comparatively very low.

What 2 factors contribute to a person making a Rational Decision?

Trade-Offs Opportunity Cost

What 3 decisions must be made do to Scarcity?

What to Produce How to Produce For Whom to Produce

When business owners are safe from personal responsibility as it pertains to business decisions or actions this is known as what?

Corporation

All debt and costs of business belong to the owner who is solely responsible for repaying those debts.

Sole Proprietors

______ occurs when people, businesses, countries, or regions of the world, concentrate on goods and service they can produce better than anyone else.

Specialization

What are the 6 factors that affect the demand of any product?

Tastes and Preferences of the Consumers: Income of the People: Changes in Prices of the Related Goods: Advertisement Expenditure: The Number of Consumers in the Market: Consumers' Expectations with Regard to Future Prices:

The amount by which the spending of a government, company or individual exceeds its income over a particular period of time

Budget Deficit

The periodic and cyclical ups and downs of the economy is known as the ------?

Business Cycle

What 6 components will allow Capitalism to work?

Consumer Sovreignty Profit Motive Private Property Rights Economic Freedom Voluntary Exchange

What are the 3 elements that go into a consumer being in demand for a product?

Desire Willingness Ability

Money that is the money to satisfy somebody's wants

Discretionary Income

Type of Income used to pay for a person's wants?

Discretionary Income

Money that is the money a person makes from their paycheck after all taxes are paid, used for buying a persons "needs"

Disposable Income

What is Economics?

Economics can be defined in a few different ways. It's the study of scarcity, the study of how people use resources and respond to incentives, or the study of decision-making. It often involves topics like wealth and finance, but it's not all about money. Economics is a broad discipline that helps us understand historical trends, interpret today's headlines, and make predictions about the coming years. Economics ranges from the very small to the very large. The study of individual decisions is called microeconomics. The study of the economy as a whole is called macroeconomics. A microeconomist might focus on families' medical debt, whereas a macroeconomist might focus on sovereign debt.

The unintended side effect of an action that affects someone not involved in the action.

Externalities

What do we call the alternative you face when making one decision rather than another?

In microeconomic theory, the opportunity cost, also known as alternative cost, is the value (not a benefit) of the choice of a best alternative cost while making a decision. A choice needs to be made between several mutually exclusive alternatives; assuming the best choice is made, it is the "cost" incurred by not enjoying the benefit that would have been had by taking the second best available choice. The New Oxford American Dictionary defines it as "the loss of potential gain from other alternatives when one alternative is chosen." Opportunity cost is a key concept in economics, and has been described as expressing "the basic relationship between scarcity and choice." The notion of opportunity cost plays a crucial part in attempts to ensure that scarce resources are used efficiently. Thus, opportunity costs are not restricted to monetary or financial costs: the real cost of output forgone, lost time, pleasure or any other benefit that provides utility should also be considered an opportunity cost.

Change in price has little change in the supply for a good

Inelastic Demand

"With every use or consumption of a good or service that good or service becomes less of a benefit to you" what best describes this economic term.

Law of Diminishing Marginal Utility

___ states that as the price of a good/service increases then producers will supply more of the product and as the price decreases they will supply less?

Law of Supply

How the government regulates the amount of money in circulation.

Monetary Policy

What is the theory that individuals left on their own would work for their own self interest?

One of Smith's biggest theories was that people work naturally toward maximizing their self-interests. The exchange of goods and services facilitates this goal, he argued, and market participants engage in those activities most beneficially when regulations and government intervention do not inhibit them from doing so. That is, the invisible hand of self-interest guides participants into exchange that is the most mutually beneficial. Smith said, for example, that by selling products people want to buy, butchers, brewers and bakers make money. However, they only get that money if they can meet the needs of their customers effectively -- that is, if they offer things people want to buy. By doing so, they are financially rewarded and they create wealth for the nation as a whole by being productive citizens. In other words, they inadvertently create the best outcome for everyone by looking out for their own self-interests. As Smith put it, "It is not from the benevolence of the butcher, the brewer, or the baker, that we can expect our dinner, but from their regard to their own interest." This idea -- that self-interest actually serves a greater good -- sits at the heart of why even today people invest their retirement money, college funds and other savings in companies or enterprises that are most likely to give them a high return for a given level of risk. And because people look out for their own self-interests, Smith argues, others benefit: Money is more likely to flow from investors into viable companies, which creates companies, jobs and a bigger economy.

goods that once consumed by someone does not exclude someone else from consuming it.

Public Goods

What 4 responsibilities do businesses have?

Responsibilities of : Consumers Owners Employees Communities

What will happen to the demand curve for products when the consumer gets a raise at work?

Shifts to the Right

When a consumer's demand is higher than the producers supply this creates what economic situation?

Shortage

Describes the American Economy, where competition is allowed to flourish with minimal Government interference.

The American economy, besides being termed capitalist, is also known as a free-enterprise system. This term emphasizes that individuals are free to own and control the factors of production. If you go into business for yourself, you may become rich selling your product. You may instead end up losing money, however, because you—or any entrepreneur—have no guarantee of success. The government places certain legal restrictions on freedom of enterprise. For instance, just because you know how to fix cars does not mean that you can set up an automobile-repair business in your backyard. Zoning regulations, child-labor laws, hazardous waste disposal rules, and other regulations limit free enterprise to protect you and your neighbors.

Which type of economy does the United States use?

The United States has always been a mixed economy. It works according to an economic system that features characteristics of both capitalism and socialism.

What are the 4 factors of productions?

The first factor of production is land, but this includes any natural resource used to produce goods and services. This includes not just land, but anything that comes from the land. Some common land or natural resources are water, oil, copper, natural gas, coal, and forests. Land resources are the raw materials in the production process. These resources can be renewable, such as forests, or nonrenewable such as oil or natural gas. The income that resource owners earn in return for land resources is called rent. The second factor of production is labor. Labor is the effort that people contribute to the production of goods and services. Labor resources include the work done by the waiter who brings your food at a local restaurant as well as the engineer who designed the bus that transports you to school. It includes an artist's creation of a painting as well as the work of the pilot flying the airplane overhead. If you have ever been paid for a job, you have contributed labor resources to the production of goods or services. The income earned by labor resources is called wages and is the largest source of income for most people. The third factor of production is capital. Think of capital as the machinery, tools and buildings humans use to produce goods and services. Some common examples of capital include hammers, forklifts, conveyer belts, computers, and delivery vans. Capital differs based on the worker and the type of work being done. For example, a doctor may use a stethoscope and an examination room to provide medical services. Your teacher may use textbooks, desks, and a whiteboard to produce education services. The income earned by owners of capital resources is interest. The fourth factor of production is entrepreneurship. An entrepreneur is a person who combines the other factors of production - land, labor, and capital - to earn a profit. The most successful entrepreneurs are innovators who find new ways produce goods and services or who develop new goods and services to bring to market. Without the entrepreneur combining land, labor, and capital in new ways, many of the innovations we see around us would not exist. Think of the entrepreneurship of Henry Ford or Bill Gates. Entrepreneurs are a vital engine of economic growth helping to build some of the largest firms in the world as well as some of the small businesses in your neighborhood. Entrepreneurs thrive in economies where they have the freedom to start businesses and buy resources freely. The payment to entrepreneurship is profit.

What is the Fundamental Economic Problem?

The fundamental economic problem is related to the issue of scarcity. Because of limited resources and infinite demands, society needs to determine how to produce and distribute these relatively scarce resources. Of course, it is possible humans could limit their demands and be satisfied with the basic necessity's of life. In some tribal society's / spiritual communities you could argue there is no economic problem because the limited resources are more than adequate to meet all their wishes. However, society is mostly dominated by people wishing to consume more goods and services than are available. Because there is a shortage of resources, economics considers: What to produce? How to produce? For whom to produce?

Where are goods and services bought and sold in the circular flow of economic activity?

The product market represents the purchases of finished goods and services in an economy. Households are the main buyers of goods and services in the product market, and businesses are the sellers of goods and services, as shown in the top half of Figure 2.3. From the circular flow model, it appears that the product market is a single physical location where products are bought and sold. But this is clearly not the case. Instead, the product market represents the millions of buy-sell transactions that are made every day in supermarkets, gas stations, convenience stores, department stores, bakeries, laundries, dentist and doctor offices, delis, and coffee shops. The transactions that take place in the product market are based on the principle of voluntary exchange. That is, both the buyer (household) and the seller (business firm) believe they will benefit from an exchange; otherwise, it will not take place. The spending by a household becomes revenue earned by a business. In an expanded version of the circular flow model, the government also appears as an important buyer of goods and services in the product market. For example, the government purchases military goods such as submarines and aircraft from private firms. Household and government spending become important sources of revenue for businesses.

What are the 4 types of Economies found in the World?

The traditional economic system is the most traditional and ancient types of economies in the world. Vast portions of the world still function under a traditional economic system. These areas tend to be rural, second- or third-world, and closely tied to the land, usually through farming. In general, in this type of economic system, a surplus would be rare. Each member of a traditional economy has a more specific and pronounced role, and these societies tend to be very close-knit and socially satisfied. However, they do lack access to technology and advanced medicine. In a command economic system, a large part of the economic system is controlled by a centralized power. For example, in the USSR most decisions were made by the central government. This type of economy was the core of the communist philosophy. Since the government is such a central feature of the economy, it is often involved in everything from planning to redistributing resources. A command economy is capable of creating a healthy supply of its resources, and it rewards its people with affordable prices. This capability also means that the government usually owns all the significant industries like utilities, aviation, and railroad. In a command economy, it is theoretically possible for the government to create enough jobs and provide goods and services at an affordable rate. However, in reality, most command economies tend to focus on the most valuable resources like oil. China or D.P.R.K. (North Korea) are examples of command economies. In a free market economy, firms and households act in self-interest to determine how resources get allocated, what goods get produced and who buys the goods. This is opposite to how a command economy works, where the central government gets to keep the profits. There is no government intervention in a pure market economy ("laissez-faire"). However, no truly free market economy exists in the world. For example, while America is a capitalist nation, our government still regulates (or attempts to control) fair trade, government programs, honest business, monopolies, etc. In this type of economy, there is a separation of the government and the market. This separation prevents the government from becoming too powerful and keeps their interests aligned with that of the markets. Hong Kong has been seen as an example of a free market society. A mixed economy is a combination of different types of economic systems. This economic system is a cross between a market economy and command economy. In the most common types of mixed economies, the market is more or less free of government ownership except for a few key areas like transportation or sensitive industries like defense and railroad. However, the government is also usually involved in the regulation of private businesses. The idea behind a mixed economy was to use the best of both worlds - incorporate policies that are socialist and capitalist. To a certain extent, most countries are mixed economic system. For example, India and France are mixed economies.

What factors affect the amount of a product the producer will supply?

i. Price: ii. Cost of Production: iii. Natural Conditions: iv. Technology: v. Transport Conditions: vi. Factor Prices and their Availability: vii. Government's Policies: viii. Prices of Related Goods: