Economics Final
Elasticity Formula
% change in quantity / % change in price
Income Elasticity Formula
% change in quantity demanded / % change in income
Price Elasticity of Demand Formula
% change in quantity demanded / % change in price
Cross Price Elasticity
% change in quantity of good x / % change in price of good y
Change in Demand Factors
-personal preference -number of buyers -income -price of related goods
Change in Supply Factors
-resource cost -technology -taxes -number of suppliers
Variables that Impact the Demand for Labor
-technology -complements & substitutes
The Supply of Labor Impacts
-wealth -alternative opportunities -preferences
Human Capital Investment
Investment of time, effort and resources in education and training—to increase one's own knowledge and/or skills
Market Failure
a situation in which the free market, operating on its own, does not distribute resources efficiently
Traditional Economic System
a system in which customs handed down from generation to generation determine how a society is organized to produce, distribute, and consume goods and services
Structural Unemployment
businesses are hiring, there is just a mismatch between people looking for work & jobs available
Demand for Labor
businesses demanding workers
High Discount Rate
cannot wait to get satisfation
What is the central assumption of economics?
ceteris paribus
Surplus
change above equilibrium
Shortage
change below equilibrium
Marginal Utility Formula
change in total utility/change in quantity
Opportunity Cost & Trade-offs
considering the decision you makes pros and cons
Opportunity Cost
considering the opportunities you are partaking in & looking at the trade offs you will face
Labor Enhancing
creates jobs
Inelastic
describes demand that is not very sensitive to price changes
Elastic
describes demand that is very sensitive to a change in price
Natural Rate of Unemployment
frictional plus structural unemployment
Public Goods
funded through state and federal taxes
What does relaxing an assumption mean?
going from a strong to weak assumption
Good & Good Forgone
good-what is being asked good forgone-the other thing
Imports
goods produced abroad and sold domestically
Exports
goods produced domestically and sold abroad
Negative Externality
harmful side effect that affects an uninvolved third party
What are the fundamental problems of economics?
having scarce resources for unlimited wants and needs
Discount Rates
how long someone can wait to get their satisfaction
Marginal Analysis & Decision Making
how we choose to use our scarce resources
Commodity
money that has value because of its material
Fiat
money that has value because some type of authority says it does
Low Discount Rate
more willing to forego the present for the future
Who is not included in the unemployment rate?
people who aren't actively seeking employment
Non-Interventionist
people who believe in a laissez-faire economy
Interventionist
people who want the government to be more involved in the economy
Types of Capital
physical, human, financial
Labor Intensive Techniques
production techniques that rely heavily on labor
Private Goods
provided by privately owned companies
Perfectly Inelastic
quantity does not respond at all to changes in price
Store Value
something that keeps its value if it is stored rather than used
Investment
spending on capital equipment, inventories, and structures, including household purchases of new housing
Total Utility Formula
sum of marginal utility
Labor Saving
takes jobs away
Excise Tax
taxes put on items deemed harmful to society
Comparitive Advantage
the ability to produce a good at a lower opportunity cost than another producer -should be producing product
Absolute Advantage
the ability to produce a good using fewer inputs than another producer -does not mean you have comparitive advantage
Law of Diminishing Marginal Utility
the additional satisfaction we gain from each consumption decreases with each consumed
Quantity Demanded
the amount of a good that buyers are willing and able to purchase
Aggregate Demand
the amount of goods and services in the economy that will be purchased at all possible price levels
Supply
the amount of goods available
Marginal Cost
the cost of producing one more unit of a good
Perfectly Elastic
the demand curve is horizontal, meaning consumers have an instantaneous and infinite response to a change in price
Derived Demand
the demand of workers comes from the demand of goods/services they provide
Demand
the desire to own something and the ability to pay for it
Market Power
the idea that a person, business, or group of people have some type of advantage over the economy
Input Method Formula
what goes into making the item (time) god forgone/good
Opportunity Cost Formula
what you give up/what you gain
Risk Externality
when a person/business operates in a way that puts others at risk
Output Method Formula
when it tells you how much could be produced good/good forgone
Bliss Point
when marginal utility is 0. if you consumed any more it would dissatify you
Artificially Created Market Power
when society has a perception that one is better then the rest and therefore gives someone market power
Free Rider Problem
when someone reaps the benefits of something but does nothing to contribute
Unit Elastic
when the percentage change in price and quantity demanded are the same
Substitutes
when the price of Pepsi goes up, the demand for Coke goes up
Complements
when the price of peanut butter goes up, the demand for jelly goes down
Frictional Unemployment
when you are out of a job but conducting a search. businesses are hiring you just haven't landed a job yet
Rent Seeking
when you don't have market power but are doing things to try and get it
Rent Maintenance
when you have market power and are trying to maintain it
Real GDP
GDP adjusted for inflation
Elasticity
A measure of how much one economic variable responds to changes in another economic variable
Agregate Expenditure Formula
C + I + G - T + X - M
Positive Externality
a benefit received by someone who had nothing to do with the activity that generated the benefit
Sunk Cost
a cost that has already been committed and cannot be recovered. should not consider when making decisions
Long-Run Aggregate Supply Curve
a curve that shows the relationship in the long run between the price level and the quantity of real GDP supplied
Short-Run Aggregate Supply Curve
a curve that shows the relationship in the short run between the price level and the quantity of real GDP supplied by firms
Inflation
a general increase in prices and fall in the purchasing value of money
Inferior Good
a good that consumers demand less of when their incomes increase
Normal Good
a good that consumers demand more of when their incomes increase
Price Ceilings
a legal maximum on the price at which a good can be sold
Price Floor
a legal minimum on the price at which a good can be sold
Monopoly
a marker with only one seller
Oligopoly
a market structure in which only a few sellers offer similar or identical products
Unit of Account
a measure used to set prices and make economic calculations
Who is included in the unemployment rate?
able-bodied workers who are looking for jobs but cannot find them
Marginal Utility
additional satisfaction received from each of an item consumed
Ceteris Paribus
all other things held constant to see how different variables impact each other
Strong Assumption
an assumption made that is broad and unrealilistic
Weak Assumption
an assumption that is more narrowed down and specific
Free Market System
an economic system based on the idea that government should interfere with economic transactions as little as possible
Command Economic System
an economy where supply and price are regulated by the government rather than market forces
Macroeconomic Model
an explanation of how the macroeconomy or part of the macroeconomy works
Medium of Exchange
anything that is used to determine value during the exchange of goods and services
Government Spending
anything the government spends money on
Naturally Occurring Market Power
being able to dominate an industry because of skills, traits, or personality someone has
Price Level
level of inflation
Physical Capital
made objects used to create other goods and services
Monopolistic Competition
many sellers of a similar product
Perfect Competition
many sellers of an identical product
Monopsony
market with only one buyer
Functions of Money
medium of exchange, unit of account, store of value
Financial Capital
money
Full Sustainable Level of Real GDP
the maximum level of real GDP the economy can sustain
Unemployment Rate
the percentage of the labor force that is unemployed
Equilibrium
the point where quantity supplied meets quantity demanded
Nominal GDP
the production of goods and services valued at current prices
Utility
the satisfaction one gets from consuming a good/service
Human Capital
the skills and knowledge gained by a worker through education and experience
Economics
the study of how society manages its scarce resources
Microeconomics
the study of small, individual parts of the economy
Macroeconomics
the study of the economy as a whole
Market Demand
the sum of all the individual demands for a particular good or service
Gross Domestic Product
the total value of goods produced and services provided in a country during one year
Consumption
the using up of a resource
Cyclical Unemployment
unemployment but businesses are not hiring
Taxes
used to offset government spending
Capital Intensive Labor
using machines for production