Economics and Personal Finance study set

403(b)

A retirement account offered through a nonprofit organization, like a university or a charitable organization

corporation

Benefits: they can afford to make large scale investments Costs: expensive because of taxes and regulations

2 subsets of economics

Microeconomics and Macroeconomics

The PACED decision-making model, a five-step procedure that provides a structure for making decisions and evaluates options before making a decision.

P- Problem (state the problem) A- Alternatives (list the alternatives) C-Criteria (list the criteria) E-Evaluate (Evaluate the alternatives using the criteria) D- Decision (make a decision)ay

Equity

The value of the shares issued by a company

three factors of production

natural, human, and capital resources

Labor or Human Resources

physical and mental capabilities of individuals used in the production of goods and services

command economies

the government or other central authority is in command

Macroeconomics

the study of the economy as a whole

Cost

the value of the next best alternative other than the choice that was made

Choices made by individuals, businesses, and governments may have ___________ consequences.

unintended

Dividend

A sum of money paid regularly by a company to its shareholders out of its profits

w-4

A tax form an employee fills out that tells the IRS how much money to take out of each of their paychecks

cooperative

Benefits: member owned Costs: decision making is slow because the members are making them

sole proprietorship

Benefits: owner makes all decisions keeps profit Costs: limited resources, and if the company fails, if will affect the owners personal assets

partnership

Benefits: owners make decisions and keep profits Costs: limited resources, and the owners might have conflict

traditional economies

It is based on agriculture, fishing, hunting, gathering. It is guided by traditions, and it may use barter instead of money.

laws of supply and demand

It shows that the amount of a good of service supplied directly effects the price

Resources

Things we use to produce goods and services including land, labor, and capital

mixed economies

a combination of all or some of the other economies

Scarcity

a condition that exists when there are not enough resources to satisfy all of the competing uses

incentives

a thing or idea that is used to encourage or discourage people from making certain decisions or behaving in a certain way

Land or Natural Resources

all types of natural resources (physical land, timber, water, oil, minerals, and plants)

market economy

an economy in which consumers decide what will be produced by purchasing what they prefer, producers choose the most profitable method of production, and goods and services are consumed by those who are willing and able to pay the market

firms

any business entity, such as sole proprietorships, partnerships, corporations, limited liability companies, franchises, or cooperatives

capital goods

any tangible assets that an organization uses to produce goods or services such as office buildings, equipment, and machinery

Adam smith

author of wealth of nations and known as the father of economics

marginal cost

can be understood as the cost of each additional unit of a good.

what financial products may pay dividend

common stock

Capital Resources

equipment, machines, tools, , infrastructure, factories, computers, copy machines, forklifts, heavy equipment, and trucks

price floors

limits imposed by government or a group on what is the lowest price that can be charged for a product. For them to be effective, they must be greater than the equilibrium price

unintended consequences

occurs when an action results in an outcome that was not intended

1040EZ

same as the 1040, but used in simpler tax situations

law of demand

states that people will buy more of a good or service at lower prices and less at higher prices, if everything else remains the same

role of an entrepreneur

take financial risks in order to order money; increase competition in economy

Marginal benefit

the additional benefit ( or change in total benefit ) resulting from an action

utility

the advantage or fulfillment a person obtains from consuming a good or service

revenue

the income generated by the sale of goods and services

human capital

the skills, abilities, and ideas learned over time in preparation for a job and while on the job

Unintended consequences

unexpected outcomes that arise due to a choice Unintended consequences can be positive when they result in unexpected benefits. Unintended consequences can be negative when they cause unexpected harm.

maximize satisfaction

when consumers analyze their choices based on the income they count on and decide what is the best combination of goods they can afford

trade-offs

when you give up something to gain something else

economic models

(are to) help understand concepts and real world date; environmentalist often use economic models

Scarcity

-The reason we must make choices (forces us to) -the condition that exists when there are not enough resources to satisfy all of the competing uses (Understanding the opportunity cost of choices can help you make better decisions that are not always obvious)

401(k)

A retirement account offered through an employer, where an employer can contribute money from his or her paycheck before or after taxes

w-2

A tax form employers send to each of their employees listing how much money that individual made during the last year and how much has already been paid in taxes.

franchise

Benefits: they gain exclusive rights to sell and benefit from products Costs: strict guidelines and regulations, limited products, and high franchise fees

how the interaction of supply and demand determine equilibrium price

The amount made and the amount sold need to be even to equal equilibrium. When more is made then sold, they have a surplus. When more is needed then is made, they have a shortage. When they have a shortage, the prices rise, while when they have a surplus, prices plummet.

elasticity of supply and demand

The more elastic supply or demand, the more responsive consumers and producers are to price changes. The more inelastic supply or demand, the less responsive producers are to price changes.

Intended consequences

outcomes or results that we expect when a choice is made.

law of supply

states that producers will increase the quantity supplied at higher prices and decrease the quantity supplied at lower prices, if everything else remains the same

private ownership

the concept that individuals are allowed to own property and use it in any legal way they see fit

Microeconomics

the study of how individuals, households, and businesses make choices

Macroeconomics

the study of the economy as a whole; economics assumes that individuals are rational and self-interested

Opportunity cost

the value of the next best alternative other than the choice that was made. it can include money, time, or experiences

purposes and implications of price ceilings and price floors

they make sure that the prices stay low enough for people to buy the goods and services

Factors of Production

things used to make goods or services

entrepreneurs

those who take calculated risks in order to start new businesses and who develop innovative products and processes

An economic model is a simplified representation of an economic enviroment

(similar to a graph)

consumer sovereignty

the concept that consumers rule. In order to succeed, businesses must produce goods and services that consumers are willing and able to buy

price ceilings

the highest allowed price for a good or service

The unemployment rate is the number of unemployed people in a country divided by the labor force and multiplied by 100 to convert to a percentage. Given that the unemployment rate does not include part-time workers or discouraged workers, the results can be misleading. There are four main types of unemployment: frictional, structural, cyclical, and seasonal.

unemployment rate= {(number of people unemployed)/(number of people in labor force)} x100

Economics

-The study of how individuals and societies make choices under the condition of scarcity -explores choices made by individuals, households, businesses, and government

1040

A tax form filled out by an individual and filed with the irs that determines the amount of income tax owed in a single year

When does a Trade-off occur?

A trade-off occurs when you give something up, to gain something else.

price system

component of any economic system that uses prices expressed in any form of money for the valuation and distribution of goods and services and the factors of production

households

refer to the people or group of people that live together and make economic decisions for private use

standard of living

refers to the level of wealth, comfort, material goods, and necessities available to a certain socioeconomics class in a certain geographic area. Its generally measured by indicators such as real income per person-adjusted per inflation- and poverty rate

elasticity

refers to the response of consumers and suppliers to the changes in price. It is equal to the percentages change in quantity divided by the percentage change in price

equilibrium

the state of the world where economic forces are balanced and values of economic variables will not change

Economics

the study of how individuals and societies make choices under the condition of scarcity