economics part 1
Inferior good
A good for which the demand decreases when income increases When a household's income goes up, it will buy a smaller quantity of such a good
Inferior Good
A good whose demand falls as people's incomes rise.
Market Clearing
A market clears when supply matches demand, leaving no shortage or surplus.
Mixed Market Economy
A market economy where there is some government intervention.
Disinflation
A reduction in the rate of inflation.
Command
An economics system characterized by a central authority (central government) making the most of the economics decisions. Government owns most and allocates a majority of resources.
Entitlement spending is that portion of budget referred to as
Mandatory spending
Shareholder
Owner of some fraction of the stock issued by a corporation
Deregulation
Reducing or eliminating government intervention to control particular market activities, especially of private firms. For example, removing price controls or monopoly privileges
LAND
Refers to all natural resources used to be produce goods and services.
Public Service
Subject to the provisions of subsections (4) and (5), the service of the Government of Trinidad and Tobago or of the Tobago House of Assembly established by section 3 of the Tobago House of Assembly Act, in a civil capacity.
Which of the following would shift a supply curve to the right?
Subsides
A government payment to support a business or market.
Subsidy
Company
Business owned by a group of people
INELASTIC
Describes demand that is not sensitive to a change in price.
Economic integration
Describes the process under which macroeconomic policies of different countries become more coordinated
Stagflation
Describes the situation when an economy experiences high levels of unemployment and inflation accompanied by low, zero or negative economic growth.
Post war motto for Germany
Economic miracle
Absolute advantage is not necessary for trade to take place, but comparative advantage is.
True
requires reserves
The amounts that banks are required to keep on deposit at a Federal Reserve Bank.
Supply
The amount of goods available
Demand
The amount of goods or a service that people want and can pay for at different prices
Disposable Persona Income
The amount of income that households actually have to spend or save after payment of personal taxes.
Asset Demand for Money
The amount of money people want to hold as a store of value; this amount varies inversely with the interest rate.
Money Supply
The amount of money that consumers, businesses, and the government have to spend.
Profit
The income a business has left after all its costs have been paid
Urban Economics
The intersection of geography and economics.
Principal City
The largest municipality in each metropolitan or micropolitan statistical area.
Who is the consumer?
The person buying the goods.
Trough
The phase of the business cycle in which real GDP reaches its minimum after falling during a recession.
MPM - Marginal propensity to import
The proportion of an extra pound of income that households are prepared to pay on imports.
SUPPLY
The quantity of goods available at a given price.
Dependency ratio
The ratio of the young and elderly to the working age population.
opportunity cost
cost of the next best alternative use of money, time or resources when making a choice
The oligopolist _____ at the minimum point of her ATC curve.
doesn't produce
gostrud
established labor and wage policies
Each of the following is a major source of great wealth except _____.
earning large salaries
Elasticity
economic concept dealing with consumers' responsiveness to an increase or decrease in price of a product
income
all the money earned from work or other sources
Which of the following is an example of a capital resource?
an oil rig
Necessary
it means something you reallt need like water,food and shelter
The branch of economics that focuses on outcomes in highly aggregated markets, such as the markets for labor or consumer products, is called:
macroeconomics
communism
no private ownership
A market economy without any ethics would have:
no value
deferral
postponed until a later time
Black market
"underground" or illegal market in which goods are traded at prices about their legal maximum prices or in which illegal goods are sold
Goods
tangible economic product that is useful, reletively scarce and transferable to others
Supply
the amount of a good or service that producers are able and willing to sell at various prices during a specified time period
supply
the amount of a good or service that producers are willing and able to sell at various prices during a given time period
total revenue
the amount of money a company receives for selling its products
Actual Budget
A listing of amounts spent by the Federal government (to purchase goods and services and for transfer payments) and the amounts of tax revenue collected by it in any (fiscal) year.
the invisible hand
the idea that competition and self-interest are what drive the free market
externality
the impact of one person's actions on the well-being of a bystander
taxation
the imposition of taxes, the right of government to require contribution from citizens to pay for government services.
disposable income
the money a person has left after all the taxes on it have been paid
substitution effect
the pattern of behavior that occurs when consumers react to a change in the price of a good or service by buying a substitute product
consumer
the people who buy goods and services
unemployment rate
the percentage of the work force that is unemployed at any given date
law of supply
the principle that suppliers will normally offer more for sale at higher prices and less at lower prices
macroeconomics
the study of the impact of changes on the economy as a whole
market demand
the total demand of all consumers for their product or service
GDP
the total value in dollars of all of the final goods and services produced within a country in a single year
Average (or 'midpoint') formula for price elasticity of demand
ΔQD /average QD ÷ ΔP/average P.
Harrod-Domar growth model
A model which argues that an economy's growth rate is a function of the level of saving (and hence Investment) and its capital output.
Barter Economy
An economy where people exchange goods and services directly with one another without any payment of money. Workers would be paid with bundles of goods.
elasticity of demand
a measurement of how consumers react to a change in price
arbitration
a third party listens to both sides and then decides how to settle the agreeement
Aggregation
Combing individual units or data into one unit or number. For e.g., all prices of individual goods and services are combined into a price level, or all units of output are aggregated into real gross domestic product.
Financial account
Composes of direct investment, portfolio investment and reserved assets
demand
Consumer's willingness and ability to buy products
THE LAW OF DEMAND
Consumers buy more of a good when it's price decreases and less when it's price increases.
Define Market Economy (Capitalism)
Economic system based upon the fundamentals of private property, freedom, self-interest, and prices... The people control the factors of production Ex. Imagine the U.S. without government touching the economy
Define Command Economy (Communism)
Economic system where the government controls the factors of production Ex. North Korea
Mixed economies
Economic systems in which some allocation of resources is made by the market and some by the government.
Standard of Living
Economic well-being of population. Incomes, employment, housing, education and environment.
An individual has a comparative advantage in production if that individual:
can produce at the lowest opportunity cost
Liquidity
cash
feds
central bank system of US
Income Effect
change in an induvidual's or economy's income
Floating exchange rate
Is one in which the value of a country's currency is determined solely by the demand for, and supply, of, the currency in the foreign exchange market . no government intervention to determine value
The marginal rate of tax
Measures the change in total tax paid by an individual or group as a percentage of the change in their income =Change in total tax paid/ change in income x 100
Define Trade-Offs
Sacrifice made to get the alternative Ex. Opportunity Cost
Dutch disease
The deindustrialization of an economy that occurs when they discover a natural resource. This is exported which raises the value of countries currency making manufactured exports more expensive.
Monetary policy
The deliberate manipulation of the money supply/rate of interest in an economy by a government and/or it's central bank in order to achieve a macro economic objective.
The optimal level of pollution for society is when
The marginal benefits of pollution equal the marginal costs of pollution
Arc Elasticity
The measurement of elasticity between two points on a curve.
Informal Sector
The parts of the economy that involve production and/or exchange, but where there are no money payments.
Interest
The payment made for the use of funds to create capital goods with
Relative Price
The price of one good compared with another (e.g. good x is twice the price of good y).
Price Elasticity of Supply
The responsiveness of quantity supplied to a change in price.
Backflows
The return of workers to the countries from which they originally migrated.
Monetary base
The same as "high-powered money": cash in commercial banks, plus cash in circulation and deposits of the commercial bank at the central bank
Econometrics
The science of applying statistical techniques to economic data in order to identify and test economic relationships.
Antitrust Policy
The use of the antitrust laws to promote competition and economic efficiency.
Current dollar
Values which have not been adjusted to remove the influence of changes in the general price level.
debits
charges to or withdrawals from an account
rational choices
choosing the alternative that has the greatest value from among comparable-quality products
Land is most efficiently used in _____.
cities
In order for trade between two countries to take place, _____.
comparative advantage is necessary.
In the 1950s and 1960s the predominant form of merger was the _____ merger.
conglomerate
overhead
cost of running a buisness
Articles of incorporation
document listing basic information about a corporation that is filed with the state where the corporation will be headquartered
The monopolistic competitor's demand curve slopes _____.
down to the right
taxes
fees charged on business and individual income, activities, property or products by governments
An oligopoly is an industry with _____.
few sellers
technological monopoly
firm controls a manufacturing method, or invention
The amount of land in the world is virtually _____.
fixed
business cycle
fluctuations in economic activity, such as employment and production
Karl Marx
founder of communism
capitalism
free market
Mutual Fund
fund that pools the savings of many individuals and invests this money in a variety of stocks, bonds, and other financial assets
For a given increase in price, the greater is the elasticity of supply, the greater is the resulting
increase in quantity supplied
economic growth
increase in the nation's GDP
A government mandated price increase of doodads will:
increase the quantity of doodads supplied but decrease the quantity of doodads demanded
supply
is the quantity of good or service offered for sale
ECONOMICS
is the study of how people seek to satisfy their needs and wants by making choices.
opportunity cost
is value of your second choice , the next best alternative
quota
restrictions on the amount of goods that can be imported into a country
Which of the following is not determinant of supply?
tastes
An example of government ownership of a monopoly is _____.
the Tennessee Valley Authority
The world's leading debtor nation is _____.
the United States
contractionary monetary policy
the federal reserve's adjusting the money supply to increase interest rates to reduce inflation
economics
the study of how individuals, businesses, government, and society make choices
embargo
to cut of all trade between countru
spend
to give money for stuff
complements
two goods for which an increase in the price of one leads to a decrease in the demand for the other
annual fee
yearly charge for having a credit card or credit account
Rent on marginal land is _____.
zero
In the long run the perfect competitor makes _____ profit; in the long run the monopolist makes _____ profit.
zero, some
Communism
A political system in which the government owns all property and dominates all aspects of life in a country.
Equilibrium
A position of balance. A position from which there is no inherent tendency to move away.
SHORTAGE
A situation in which a good or services in unavailable.
Sachs/Balcerowicz
Shock therapy plan implemented on January 1st, 1990\
Any situation in which quantity demanded exceed quantity supplied.
Shortage (Excess Demand)
Human Capital
Depends on the quality of labour (knowledge & skill obtained through education or job experience & training).
Which of the following is true?
If input prices fall, this will lower the costs of production, causing the supply curve to shift to the right
Demand pull inflation
Occurs when the rise in the average price level is an economy is due to excessive aggregate demand.
Budget Line
A line that shows the different combinations of two products a consumer can purchase with a specific money income, given the products' prices.
Inventory
A list of possessions or goods on hand.
utility
capacity for a good or service to be useful
Copyright
exclusive right to sell, publish, or reproduce creative works for a specified number of years
The fact that some resources and skills cannot be easily adapted from their current uses to alternative uses is the basic reason for the law of
increasing opportunity cost
Barriers to entry
obstacles to competition that prevent others from entering a market
wages
payments
spending
purchasing goods or services
Derived demand is the demand for _____.
resources
tariffs
taxes placed on imported goods
The most common corporate crime is _____.
taking advantage of insider knowledge for ill-gained profits
debt consolodation
taking out one loan to cover a variety of debts
demand
the desire, willingness, and ability to buy a good or service
Balance of Trade
the difference between the values of exports and imports of a country, said to be favorable or unfavorable as exports are greater or less than imports.
Market
the process of freely exchanging goods and services between buyers and sellers
Exchange rate
the rate at which one currency can be exchanged for another.
Cash
the relatively stable investments that can easily be changed into currency.
Along a supply curve, a decrease in price will increase total revenue:
under no circumstances
LAISSEZ FAIRE
The doctrine that states that government generally should not intervene in the marketplace.
International trade
The exchange of goods, services and capital between one country and another country/other countries
Producers' Share of a Tax on a Good
The proportion of the revenue from a tax on a good that arises from a reduction in the price to the producer (after the payment of the tax).
Consumers' Share of a Tax on a Good
The proportion of the revenue from a tax on a good that arises from an increase in the price of the good.
inferior good
a good for which, other things equal, an increase in income leads to a decrease in demand
communism
This is also known as authoritarian socialism, and is said to be practice by mixed economies that are closest to the pure command model.
authoritarian socialism
This is also known as communism, and when this occurs, the government owns or controls nearly all the factors of production.
shortage
a lack of a good, low amount
Consumption
Using goods and services
recession
a contraction lasting two or more quarters
College textbook publishing is most accurately described as _____.
a duopoly
The earned income tax credit is _____.
a form of welfare
The real core of most economic problem is to:
allocate limited resources among competing uses
gossnab
allocated productive resources
trade off
alternative that is available whenever a choice is to be made
IMF
an organization working to foster global monetary cooperation, secure financila stability, facilitate internatinal trade and reduce poverty
money v. bartering
using money is much simpler than bartering, it is durable and easy to carry, acceptable for any purchase
Comparative advantage
when one country can produce a good or service at a lower opportunity cost than another.
excess demand
when quantity demanded is more than quantity supplied
Capital
An economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state.
traditional economy
An economy in which production is based on customs and traditions and economic roles are typically passed down from one generation to the next.
market economy
An economy that relies chiefly on market forces to allocate goods and resources and to determine prices.
Centrally Planned or Command Economy
An economy where all economic decisions are taken by the central authorities.
Demand Function
An equation which shows the mathematical relationship between the quantity demanded of a good and the values of the various determinants of demand.
circular flow
A model that indicates how money moves throughout an economy
Complementary Goods
A pair of goods consumed together. As the price of one goes up, the demand for both goods will fall.
Balance of trade
A record of a country's exports and imports of goods and services
Beta
A relative measure of nondiversifiable risk that measures how the nondiversifiable risk of a given asset or portfolio compares with that of the market portfolio (the portfolio that contains every asset available in the financial markets).
Indirect tax
Is one imposed on a variable such as expenditure where it is collected when a sale has been made. E.g in the UK V.A.T or excise duty.
Demand
Is the amount of a good or service that consumers are willing and able to buy at a certain price
HUMAN CAPITAL
Is the knowledge and skills a worker gains through education and experience.
Balance on Goods & Services
The exports of goods and services of a nation less its imports of goods and services in a year.
Comparison shopping
The practice of comparing prices of actually shopping in order to achieve the best deals
Equilibrium Price
The price where the quantity demanded equals the quantity supplied: the price where there is no shortage or surplus.
3 things that change supply
The price, change in technology, change in government
Net exports
The total value of goods and services exported during the accounting period minus the total value of goods and services imported
Production
The transformation of inputs into outputs by firms in order to earn profit (or meet some other objective).
Fiscal policy
The use by a government of its expenditures on goods and services and/or tax collections to influence the level of national income
Monetary policy
The use of the central bank's power to control the domestic money supply to influence the supply of credit, interest rates and ultimately the level of real economic activity
Nominal GDP
The value of all final goods based on the prices existing during the time period of production.
productivity
a measure of the amount of output produced by a given amount of inputs in a specific period of time
consumerism
a movement to educate buyers about the purchases they make to demand better and safer products from manufacturers
Buyers who were originally willing to buy 800 units of a good at $4 per unit are now willing to buy 1200 units at $4 per unit, That change would be described as:
an increase in demand
demand side policy
any government policy designed to influence the aggregate demand in the economy, thus affecting the average price level and real national output
Market
any place where the sellers of a particular good or service can meet with the buyers
Technology
any use of land, labor, and capital that produces goods and services more efficiently
Natural resources
are materials that come from nature. Some examples are water, oil, wood, and coal.
Human resources
are people who work to produce goods and services. Examples are farmers, miners, builders, and doctors.
goods
are physical items such as food , clothing , cars, and house
entrepreneurs
risk-taking individuals who introduce new products or services in search of making a profit
Law of diminishing marginal utility
rule stating that the additional satisfaction a consumer gets from purchasing one more unit of a product will lessen with each additional unit purchased
economic models
explains how the economy works or predict what would happen if something in the economy changed
marginal cost
extra cost of producing one additional output
If the minimum wage were eliminated, wages would definitely _____ for some marginal workers, and the employment of marginal workers would definitely _____.
fall, rise
standard of living
quality of life based on ownership of necessities and luxuries that make life easier
Along a supply curve:
quantity supplied changes as price changes
trade cycle
recurring fluctuations in economic activity consisting of recession and recovery and growth and decline
Limited liability
requirement in which an owner's responsibility for a company's debts is limited to the size of the owner's investment in the firm
Which of the these conditions are most likely to motivate honest people to become corrupt?
seeing your boss and fellow workers get rich by lying and cheating
Preferred stock
shares of ownership in a corporation that give stockholders a portion of future profits (before any profits ho to holders of common stock), but no voting rights
Demand schedule
table showing quantities demanded at different possible prices
Supply schedule
table showing quantities supplied at different possible prices
Demand Schedule
table that lists the quantity of a good all consumers in a market will buy at every different price
specialization
takes place when people, businesses, regions and even countries concentrate on goods or services that they can produce better than anyone else
a good
tangible economic product that is useful, transferable to others, and used to satisfy wants and needs
goods
tangible items of value that we can see and touch (computers, phones, clothing, food)
goods
tangible products that we use to satisfy our wants and needs
If the elasticity of demand coefficient for a good is one-sixth (in absolute terms), we know:
that for every 1% increase in quantity, there will be a 6% decrease in price.
total revenue
the number of units sold multiplied by the average price sold
consumer sovereignity
the one who determines what products will be produced
labor
the people whose efforts and skills go into the production of goods and services
supply
the various quantities of a good or service that producers are willing to sell at all possible market prices
Vertical merger
when corporations involved in a chain of supply merge (ex. a paper company buying the office supply business that sells its paper)
In a market economy how do we determine who will get the goods and services that have been produced?
whoever can afford them
For a given good, the market demand curve is generally ______ than the demand curves for the individual consumers
wider
labor
work groups
service
work or labor performed for someone
Interest
$ paid for the use of someone else's $
To keep a family of four at the poverty line a person working a 40-hour week would need to earn about _____ an hour.
$11
Our biggest annual trade deficit in our history was more than _____ billion.
$500
Adam Smith
(1723-1790) Scottish philosophe who formulated laws that governed the economy to benefit human society
Which of the following are reasons why most owners of companies want their employees to act ethically?
(All of the above) -Decrease in market demand -Decrease in market supply -Decrease in equilibrium price -Total market collapse
Which of the following is not a resource exchanged in the factor markets?
(All of the above) -land -capital -labor -entrepreneurship
gross domestic product
(GDP) the value of all the goods and services produced within a country in a given year
Which of the following is true?
(None of the above are true) -In the product markets, firms are buyers and households are sellers -In the factor markets, firms are sellsers and households are buyers -Firms receive money payments from households for labor, land, capital, and entrepreneurship
If the government wanted to reduce the quantity of a good traded, it could do so by:
(doing any of the above) -setting a price ceiling for the good below the equilibrium price -setting a price floor for the good above the equilibrium price -tax the good more heavily -tax an input used intensively in the industry more heavily
GDP at factor cost
+ this = GNP AT FACTOR COST
Which of the following is true?
-An economy in which labor is relatively scarce would tend to use capital intensive production methods -An increase in the availability of labor relative to capital in the economy would tend to increase how labor intensive the production processes in that economy would be.
Cost-benefit analysis can determine the optimal amount of all the following:
-Regulations -Market inspectors -Severity of punishments -Inspections EXCEPT: fairness of rules
In order for a market's ethics to be effective, all of the following must occur:
-The ethics must be clearly defined -There must be clear penalties for ethics violators -There must be enough police or inspectors to find most violations -Police or inspectors must be unbiased EXCEPT: everyone must agree to take part in the market
Aggregate Demand
...
Normal profit
...
Karl Marx
1818-1883. 19th century philosopher, political economist, sociologist, humanist, political theorist, and revolutionary. Often recognized as the father of communism. Analysis of history led to his belief that communism would replace capitalism as it replaced feudalism. Believed in a classless society.
NIRA
1933, codes that regulated wages, working conditions, production, and prices, set minimum wage.
Glass Steagall Banking Act
1933, established FDIC to insure bank deposits
AAA
1933,1938, payed farmers to stop growing crops
WPA
1935, employed 8.5 million people to build or improve playgrounds, schools, hospitals, and airfields
Bailey's Barber Shop knows that a 5% increase in the price of their haircuts results in a 15% decrease in the number of haircuts purchased. What is the elasticity of demand facing Bailey's Barber Shop?
3.0
The richest 1 percent of our population owns over _____ percent of our wealth.
40
If our trade deficit with china and Japan were 0, our total trade deficit would be reduced by almost $_____.
50 billion
Antitrust today could best be summed up by the _____.
60 percent rule
The motor vehicle industry has a concentration ratio of almost _____ percent.
65
Our trade deficit in 2009 was $_____.
706 billion
GDP at factor cost
= GDP at market prices - indirect taxes + value for subsidies.
GDP at market prices
= Total domestic expenditure + (X-M)
Rate of economic growth
= new figure- old figure/old figure x 100.
Alcoa Case
A 1945 case in which the courts ruled that the possession of monopoly power, no matter how reasonably that power had been used, was a violation of the antitrust laws; temporarily overturned the rule of reason applied in the U.S. Steel case.
Capacity
A borrowers ability to repay based on income and current debt
Aggregate
A collection of specific economic units treated as if they were one. For example, all prices of individual goods and services are combined into a price level, or all units of output are aggregated into gross domestic product.
Metropolitan Area
A core area with a substantial population nucleus, together with adjacent communities that are integrated, in an economic sense, with the core area.
VARIABLE COSTS
A cost that rises or falls depending on how much is produced Produce more beanbags= purchase more beans and hire more workers Produce less beanbags= stop buying beans and have less workers work per week Electricity and heating bills
Deflation
A decrease in the general (average) price level of goods and services in the economy.
Land
A factor of production known as gifts of nature, used to produce goods & services and earns rent.
Block Group
A group of contiguous census blocks.
Market Size
A growing market increases demand. A shrinking market decreases demand.
Bilateral Monopoly
A market in which there is a single seller (monopoly) and a single buyer (monopsony).
Monopolistic Competition
A market structure where, like perfect competition, there are many firms and freedom of entry into the industry, but where each firm produces a differentiated product and thus has some control over its price.
resource market
A market used to exchange the services of resources labor, capital, and natural resources.
Circular flow of income
A model that indicates how money moves throughout an economy, between businesses and individuals
Late fee
A penalty in addition to interest that is charged if payment is recieved after the due date
Which of the following policies would be most effective in promoting monthly water conservation?
A per gallon fee that escales from $1.00 to $2.00 per 25 gallons once household consumption exceeds 1,000 gallons
Expansion
A period of economic growth as measured by a rise in real GDP
Grace period
A period of time during which you are not charged interest on new purchases (if you have no outsing balance
Supply Curve
A positively upward sloping curve in a graph showing the relationship between the price of a good and the quantity of the good supplied over a given period of time.
Future Price
A price agreed today at which an item (e.g. commodities) will be exchanged at some set date in the future.
Quota
A quota is a limit on the number or value of a good that can be imported into a country .
Revaluation
A rise in the value of a country's currency under a fixed exchange rate. Exports dearer.
Urban Cluster
A scaled-down version of an urbanized area.
Budget
A spending plan that helps people keep track of their money.
Normative Statement
A value judgement.
Positive Statement
A value-free statement which can be tested by an appeal to the facts.
Base Year
A year chosen as a reference point for comparison with some earlier or later year.
Resource Substitutability
Ability of resources to be applied to different things, some better than others
Utility
Ability or capacity of a good or service to be useful and give satisfaction to someone.
Law of Demand
According to the _________, when prices increase, quantity demanded will decrease.
Deposit
Adding $ to an account
Define Marginal
Additional Ex. If each hot dog costs $6 the marginal cost of the next hot dog is $6
NEED
Air, food, and shelter that is necessary for survival.
The demand curve and demand schedule are based on what assumption?
All economic factors other than price remain constant
Labour
All forms of human input, both physical and mental, into current production. Labour force is limited in number & skills and earns wages.
Capital
All inputs into production that have themselves been produced: e.g. factories, machines, tools, equipment, buildings and other constructions. It earns interest.
Land
All natural resources The "gifts of nature" which are economically useful
Urban Population
All people living in urbanized areas and urban clusters.
Bussiness Cycle
Alternating periods of economic growth and contraction, which can be measured by changes in real GDP.
Trade Off
Alternative that must be given up when one choice is made rather than another.
AFL - CIO
American Federation of Labor - Congress of Industrial Organizations; the largest federation of labor unions in the United States.
Payroll deduction
Amount of $ automatically subtracted from gross pay for taxes, insurance, retirement, etc.
demand
Amount of goods and services people are willing to buy
Cost Ratio
An equality showing the number of units of two products which can be produced with the same resources; the cost ration 1 corn = 3 olives shows that the resources required to produce 3 units of olives must be shifted to corn production to produce 1 unit of corn.
Credit rating
An evaluation of a northward ability to repay a loan based on character capacity and collateral
Labor union
An organization of workers that tries to improve working conditions, wages, and benefits for its members
Partnership
An unincorporated business owned by two or more people
Court
Any court of law in Trinidad and Tobago other than a court martial and shall be construed as including the Judicial Committee.
TRADE OFFS
Are all the alternatives that we give up whenever we choose one course of action over another.
ENTREPRENEURS
Are ambitious leaders who decide how to combine land, labor and capital resources to create new goods and services.
Expenditure switching policies
Are designed to change spending away from imports to domestically produced goods and services
Supply side policies in terms of BOP
Are designed to increase the competitiveness of exporting firms
Expenditure reducing policies
Are designed to reduce aggregate demand. Deflationary fiscal/monetary
Institutional changes
Are economic angle political changes which can affect both the quantity and quality of the factors of production and shift LRAS to the right or left.
Imports
Are foreign goods and services brought by domestic households and firms
Automatic stabilizers
Are mechanisms within an economy that allow it to respond to demand side shocks without any government intervention.
A budget deficit
Arises when a Gov plans to spend more money than it raises. This will increase government/public debt.
A budget surplus
Arises when the government plans to spend less/raise more money than it spends. This can decrease public debt but is often used to be future tax cuts.
diminishing returns
At a certain level of production, the cost per unit of producing additional units increases. This occurs because when one factor of production increases but other factors are held constant, a point is reached where the additional inputs will ad less production than the preceding inputs
diminishing marginal productivity
At a certain point, adding another worker (or other factor of production) does not increase production as much as the preceding additions of workers
Supply side policies
Attempt to change the quantity and/or quality of an economy's factors of production in order to increase it's potential output i.e LRAS.
Interventionist supply side policies
Attempt to improve the institutional framework in the economy.
ATM
Automatic teller machine
What are four factors that affect elasticity?
Availability of substitutes Relative importance Necessities versus luxuries Change over time
AFC
Average Fixed Cost is a firm's total fixed cost divided by output (the quantity of product produced).
AP
Average Product is the total output produced per unit of a resource employed ( total product divided by the quantity of that employed resource).
APC
Average Propensity to Consume. Fraction (or percentage) of disposable income that households plan to spend for consumer goods and services; consumption divided by disposable income.
APS
Average Propensity to Save is a Fraction (or percentage) of disposable income that households save; saving divided by disposable income.
Choice
Because wants are unlimited and resources are limited, all economies must choose which goods and services should be produced and in what quantities
Voluntary Exchange
Both traders expect to benefit as a result of an exchange between the two.
Complimentary Good
Bought with another good, increase in price leads to decrease in demand of its complimentary good and vice versa
Intangible assets
Brand names, copyrights, franchises and patents.
BWS
Bretton Woods System is the international monetary system developed after World War II in which adjustable pegs were employed, the International Monetary Fund helped to stabilize foreign exchange rates, and gold and the dollar were used as international monetary reserves.
BTU
British Thermal Unit is the amount of energy required to raise the temperature of 1 pound of water by 1 degree Fahrenheit.
John Maynard Keynes
British economist who argued that for a nation to recovery fully from a depression, the govt had to spend money to encourage investment and consumption.
capital resources
Buildings, Tools, and Equipment
BEA
Bureau of Economic Analysis is an agency of the U.S. Department of Commerce that compiles the national income and product accounts.
Free Economies
Businesses can operate without too many rules from the Government
Importing
Buying items from another country
Civil War
Caused by poor governance and/or high levels of currents.
Income Effect
Change in quantity demanded of one item based on increase or decrease of purchasing power
Substitution Effect
Change in quantity demanded of one item based on relative price change to its substitute
_____ is the country with which we have the largest trade imbalance.
China
Rational Choices
Choices that involve weighting up the benefit of any activity against its opportunity cost.
Hard commodities
Commodities that can be mined
GNP
Commonly referred to as GNI
Induction
Constructing general theories on the basis of specific observations.
Determinant of Demand
Consumer Income, Substitute good, complimentary good, preferences, future expectations, number of buyers
Goodhart's Law
Controlling a symptom (i.e. an indicator) of a problem will not cure the problem. Instead, the indicator will merely cease to be a good indicator of the problem.
Allocative Efficience
Correct mix of products that benefits society the most
Determinants of Supply
Cost of inputs, technological advances, taxes/subsidies, producer expectations, price of other goods that can be produced, current quantity of product already in the market
Opportunity Cost
Cost of the next best alternative use of money, time, or resources when one choice is made rather than another.
Variable Costs --> _________, _________ --> Supplier's Total Costs
Costs of beans and fabric
Fixed Costs --> _________, _________ --> Supplier's Total Costs
Costs of the factory building and all equipment inside
Investing
Creating capital goods. Acquiring or producing structures, machinery and equipment or inventories
Production
Creating products by people called producers. Products can be anything from hats to food or clothes
Cost-benefit analysis
Deciding if something is worth it
Consumers expect a surplus for a product to develop in a market. What is the likely effect on consumers' demand for this product today?
Decrease
diminishing marginal utility
Decreasing satisfaction or usefulness as additional units of a product are acquired
Inelastic
Demand does not change much if prices go up or down.
Princes rise
Demand falls
Inelastic
Demand for goods that are necessities is usually _________.
Prices fall
Demand goes up
interdependence
Depending on other people or countries
DEMAND
Desire for goods and services.
Sustainable development
Development that meets the need of the current generation with comprising the quality of life for future generations.
Production Possibilities Curve
Diagram representing maximun combinations of goods and/or services an economy can produce when all productive resources are fully employed.
Direct investment
Difference between a domestic country's purchased oflong term foreign assets and foreign purchases of long term domestic assets. E.g property & business
Capital transfers
Difference between the transfer of goods and financial assets by migrants entering and leaving the domestic economy. E.g debt forgiveness, death tax
Define Production Possibilities
Different quantities of goods that an economy can produce with a given amount of scarce resources
Rational Decision Making
Doing more of an activity if its marginal benefit exceeds its marginal cost and doing less if its marginal cost exceeds its marginal benefit.
Exports
Domestic goods and services brought by foreigners
Which of the following would break a positive ethic?
Driving two miles per hour over the speed limit
MARKET ECONOMY (capatalism or free market)
Economic decisions are made by individuals and are based on exchange or trade.
Market Economy
Economic decisions are made by individuals or the open market.
Firms
Economic entities which buy or employ factors of production and organize them to create goods and services for sale
House
Either the House of Representatives or the Senate as the context may require.
A measure of how suppliers will respond to a change in price.
Elasticity of Supply
The point at which quantity demanded and quantity supplied are equal.
Equalibrium
WTO
Established in 1995 and set rules for international trade. Achieves aims through negotiations between member countries which are designed to promote free trade and lower barriers to trade.
An American importer of Italian shoes would pay in _____.
Euros
What factors can lead to disequilibrium?
Excess demand Excess Supply
A tax on the sale or manufacture of a good.
Excise Tax
Underemployment
Exists when a country is operating at a point inside its production possibility curve. Applies to all FOP and not just labour.
A closed shop
Exists when a trade union will not allow anyone to work unless they are a member of the trade union.
Absolute poverty
Exists when households do not have access to the basic necessities needed to sustain life.
Relative poverty
Exists when living standards of some households are below those of the average household in an economy.
Fixed expenses
Expenses that don't change every month -remain e same
Keynesian Multiplier
Explains how a change in ad will lead to a more than proportional change in national income.
Balance of Trade
Export of goods and services minus imports of goods and services. If exports exceed imports, there is a "balance of trade surplus" (a positive figure). If import exceeds exports, there is a "balance of trade deficit" (a negative figure).
Gini co efficient
Expresses the relationship shown by a country's Lorenz curve diagram as a number.
Resources
Factors of Production known as Land, Labour, Capital and Enterprise.
Factors of Production
Factors of production fall into three main groups - land, labor, and capital - and sometimes include entrepreneurship.
In competitive market structures, economic profits are always greater than zero in the long run.
False
In terms of number, most firms are corporations.
False
Most air pollution is in lower developed countries which do not have pollution control laws.
False
FDIC
Federal Deposit Insurance Corp. Guarantees your $ up to $100,000
FICA
Federal InsuranceContributions Act (commonly called Social Security) this is a transfer tax because it transfers $ from people who are working to those who NO LONGER WORK.
Protects the consumer
Federal government passes laws that protect the consumer and with government agencies (USDA, OHSA)
Service charge
Fee charged by financial institution for services it provides to customers
Final Goods
Finished goods and services produced for the ultimate user.
Market Liberalisation
Fiscal policy discipline: Investing in education, infrastructure and health care. Competitive exchange rate. Deregulation and Trade liberalisation.
FPI
Foreign portfolio investment is undertaken by foreign households in a country's shares
Adam Smith
Founder of capitalism
A formula for GDP
GDP = C + I + G + (X − M)
Per capita income
GDP divided by the population.
Nominal GDP
GDP is money terms, UNADJUSTED for inflation.
GDP
GDP is the monetary value of the final goods and services produced by fop within an economy during a given time period regardless of who owns such productive assets
What is Inflation?
General rise in prices from one year to the next.
Preferential trade agreements
Give favourable access to certain products from certain countries by reducing/eliminating tariffs or other agreements relating to trade
If an increase in the price of Good X causes a decrease in the demand for Good Y, we can conclude that:
Goods X and Y are complements
Exports
Goods and Services sold to other countries
Intermediate goods
Goods and services used as inputs for the pro- duction of final goods.
What is the sales of goods act?
Goods must be of merchantable quality.
Inferior Goods
Goods whose demand decreases as consumer incomes increase. Such goods have a negative income elasticity of demand.
Normal Goods
Goods whose demand increases as consumer incomes increase. They have a positive income elasticity of demand. Luxury goods will have a higher income elasticity of demand than more basic goods.
Demand-side Policy
Government policy designed to alter the level of aggregate demand, and thereby the level of output, employment and prices.
Supply-side Policy
Government policy that attempts to alter the level of aggregate supply directly.
Fiscal policy
Government policy that attempts to manage the economy by controlling taxing and spending.
SAFETY NET
Government programs that protect people experiencing unfavorable economic conditions.
GDP
Gross Domestic Product, or GDP is the total market value of all final products produced in a country during a single year.
Natural increase
Growth of the population due to an excess of births over deaths
Mixed Economy
Has characteristics of Command and Market Economies
Primary product dependency
Heavy reliance on a narrow range of commodities to promote economic growth.
High savings =
High income but low development.
Surplus/ Excess Surplus
High price, less quantity demanded then supplied
Relative/Real Price
How much of your income that product takes or what else you could've bought with that money
Absolute Price
How much something costs in dollar amount
Entrepreneurship
Human resource that pull together the other factors of production, land, labour and capital. It earns profits.
PHYSICAL CAPITAL
Human-made objects used to create other goods and services.
Equilibrium
I+G+X (Injections)= S+T=M(Leakages) If Injections are greater than leakages The circular flow will expand and national income will increase If leakages are greater than injections The circular flow will contract and national income will decrease
Define Comparative Advantage
If a producer can produce a good at a lower opportunity cost than all other producers Ex. The smaller fraction
Absolute Advantage
If a producer can produce more than all other producers Ex. The bigger number
Dissaving
If individuals or households spend more than their current income they are said to be dissaving
The marginal benefit to you of drinking bottled iced tea is $1.50. The price of a bottle of iced tea is $1.25.
If you purchase a bottle of iced tea, the net gain to you from doing so is 25 cents.
Business Cycle
Illustrates how changes in real GDP lead to periodic fluctuations in economic activity
capitalism
In a mixed economy that is based on this, individuals own the factors and answer the basic economic questions.
Sitting
In relation to a House, a period during which that includes any period during which that House is sitting continuously without adjournment, and includes any period during which the House is in Committee.
Session
In relation to a House, the sittings of that House commencing when it first meets after this Constitution comes into force or after the prorogation or dissolution of Parliament at any time, and terminating when Parliament is prorogued or is dissolved without having been prorogued.
Alters
In relation to an existing law, includes repealing that law and reenacting it with modifications or making different provisions in place of it or modifying it.
Competition
In the general sense, a contest among sellers or buyers for control over the use of productive resources. Sometimes used as a shorthand way of referring to perfect competition, a market condition in which no individual buyer or seller has any significant influence over price
democratic socialism
In this third and final type of mixed economy, it falls between authoritarian socialism and capitalism. The government owns some of the factors of production in this, but individuals are able to influence economic planning through the election of government officials.
market economy
In this type of economy, individuals answer the three basic economic questions. The government has no say in what, how, and for whom goods are produced, and the factors of production are owned by individuals.
Government Expenditure (G)
Includes all Government spending on goods and services accept that on transfer payments because such payments are not for goods/services producers
The labour force
Includes all people of working age who are willing and able to work.
Law
Includes any enactment, and any Act or statutory instrument of the United Kingdom that before the commencement of this Constitution had effect as part of the law of Trinidad and Tobago, having the force of law and any unwritten rule of law.
Judge
Includes the Chief Justice, a Judge of Appeal and a Puisne Judge.
List and describe three causes for shifts in the demand curve.
Income Consumer Expectations Consumer tastes and advertising
What is the correct fiscal policy when a recession is caused by a decrease in aggregate demand?
Increase government spending and decrease taxes
Name and describe three factors that can cause a change in supply.
Input costs (effect of rising costs, technology) Government Influence (subsidies, taxes, regulation) Global Economy Other (future expectations, number of suppliers)
Land and Raw Materials
Inputs into production that are provided by nature: e.g. unimproved land and mineral deposits in the ground.
Market failure
Instances of a free market being unable to achieve an optimum allocation of resources
IRS
Internal Revenue Service, agency that collects federal income taxes.
Economic Sub-disciplines
International, Public Sector, Financial, Health, Population, Labour, Political & History of Economic Thought.
Positive Economics
Investigation of the way in which different economic agents in society seek to achieve their. Descriptive and based on questions & Economic Theory.
Which of the following is true with regard to production possibilities curves?
Investing in capital goods will increase the future production capacity of an economy, so an economy that invests more now (consumes less now) will be able to produce, and therefore consume, more in the future
Open market operations
Involve a central bank buying or selling government securities in the money market.
Market-based supply side policies
Involves increasing the productive capacity of an economy.
Trade liberalization
Involves removing barriers to trade (protectionist measures) and encouraging competition amongst exporting/importing firms/countries.
MIXED ECONOMIES
Is a combination of traditional, market and centrally planned economics.
Embargo
Is a complete or total ban on an import. rare
Scarity
Is a condition that results from the imbalance between unlimited economics needs and wants and the limited resources available to satisfy those needs and wants
Common market
Is a customs union with common policies on the productions of goods, provision of services and the free movement of goods, services, labour and capital
An equitable distribution of income
Is a fair distribution of income.
Direct tax
Is one imposed on a variable such as income, wealth, profit etc and deducted at the source. No choice but pay up e.g death tax and income tax.
Managed exchange rate
Is one in which a fixed exchange rate system or a freely floating exchange rate system is subject to government intervention
An equal distribution of income
Is one in which everyone will receive the same income.
Nonrenewable resource
Is something that can't be replaced easily.
Euro
Is the European Unions currency
goods
Items businesses sell that can be physically weighed or measured, such as iPods and CDs.
Middle income trap
LEDCs develop to a certain extent then can not process any further, because they can not compete in export market with ore expensive labour costs. And they can not catch up with high income countries.
Unions
Labor coming together to make sure they interests and rights are heard and respected.
human resources
Labor to produce goods
Business Unionism
Labor unionism which concerns itself with such practical ans short-run objectives as higher wages, shorter hours, and improved working conditions.
Name all of the Factors of Production
Labor, Land/Natural Resources, Capital, Entrepreneurship
Geographical causes of under development
Lack of natural resources, fertile land, good weather. Natural disasters and political reasons. Located near coast or other developed countries.
Resources
Land (forests, mines, oceans) Labor (Parents, you, me) Capital (long lasting, chairs, desks) Entrepreneurs - store owners
Means of production
Land, Labor, Capitol & Entrepreneurs
What are the 4 factors of production?
Land, Labour, Capital and Enterprise
FACTORS OF PRODUCTION
Land, labor, or capital.
Non-produced assets
Land, rights and rights to natural resources
Socialism
Large Government involvement in the economy
Ceteris Paribus
Latin for 'other things being equal'. This assumption has to be made when making deductions from theories.
The tendency of supplier to offer more a good at a higher price.
Law of supply
Antitrust Law
Laws that seek to make sure businesses compete fairly, and prevent unfair partnerships
Antitrust Laws
Legislation (including the Sherman Act and Clayton Act) that prohibits anticompetitive business activities such as price fixing, bid rigging, monopolization, and tying contracts.
National Labor Relations Act or Wagner Act
Legislation passed in 1935, which recognizes labor's right to bargain collectively as a union
Taft-Hartley Act
Legislation passed in 1947 that outlawed the closed shop, prohibited federal employees from striking, permitted the President to seek an injunction delaying strikes that harm the national interest, and permitted state "right-to-work" laws
What does Caveat Empor mean?
Let the buyer beware.
STANDARD OF LIVING
Level of economic prosperity.
Mixed Market economy
Limtited, but some, government involvement in the economy
High investment =
Low incomes but high development.
Shortage/Excess Demand
Low price, more quantity demanded then supplied
Trough
Lowest point of a business cycle.
Necessities v Luxuries Elasticity
Luxuries are elastic; necessities are not
The firm will hire workers until the wage rate and the _____ of the last worker hired are equal.
MRP
A firm will use increasing amounts of a resource until the _____ of that resource is equal to its _____.
MRP, price
Capital goods
Machines and tools
Depreciation
Makes a country's exports relatively cheaper and its' imports relatively dearer. A fall in the value of a country's currency under a freely floating exchange rate system
Appreciation
Makes a country's exports relatively dearer and its' imports relatively cheaper.A rise in the value of a country's currency under a freely floating exchange rate system
Define Marginal Analysis
Making Decisions based upon weighing the marginal benefits and costs of that action
Normative Economics
Making suggestions about the ways in which society's goals might be more efficiently realized. Prescriptive, known as Policy Economics.
Define the resource Capital
Man Made Equipment Ex. Machinery, Buildings, Roads, Vehicles, Equipment
The income that the supplier receives from selling one more unit.
Marginal Revenue
MPL
Marginal propensity of leakages.
MPW
Marginal propensity of withdrawals.
Firms maximize profit when
Marginal revenue=marginal cost
Free Enterprise Economy
Market economy in which privately owned businesses have the freedom to operate for a profit with limited government intervention.
FACTOR MARKET
Market in which firms purchase the factor or production from household.
Which of the following approaches to pollution control have had the most dramatic results in decreasing pollution?
Markets for pollution rights and regulation
Productive Efficiency
Max production
Define Productive Efficiency
Maximum output for a given level of technology and resources Ex. Any point on the production possibility line and bottom of ATC
TVA
May 1933, provided jobs, hydroelectric power, and flood control
Current account surplus
Means a country's revenue from exports is greater than its expenditure on imports AD
Capital transfers
Measures the difference between the transfer of goods and financial assets by migrants entering and leaving the domestic economy.
Transactions in non-produced, non-financial assets
Measures the difference between transfers of non-produced assets and intangible assets between a domestic economy and foreign citizens.
Unemployment rate
Measures the number of people who are unemployed as a percentage of a country's labour force. Updated every quarter. (Number of people unemployed x 100) = Size of the labour force
The average rate of tax
Measures the total tax paid by an individual or group as a percentage of their income. = Total tax paid/income x 100
The natural rate of unemployment
Measures the umber of percentage of the work force who will be unemployed at an economy's full employment level of national income.
Functions of money
Medium of exchange- a common object we can all trade with Standard of value- every item has a set value, so there's no guessing the worth of goods and services Store of value- it can be saved and used in the future (you can put it away or in the bank)
Beaten Paths
Migration routes taken previously by family, relatives, friends, and other migrants
Needs
Minimum physical necessities that you must have in order to survive, e.g. food, shelter & clothing.
What problem can a price floor cause?
Minimum wage A full-time worker being paid the federal minimum wage will earn less than what is necessary to support a couple with a child Above equilibrium = decrease in employment Below equilibrium = No effect because employers would have to pay at least the equilibrium rate
What type of economic system does Ireland operate under?
Mixed Economy.
Actively Managed Funds
Mutual funds that have portfolio managers who constantly buy and sell assets in an attempt to generate higher returns than some benchmark rate of return for similar portfolios.
The act that supported union organizing was the _____.
National Labor Relations Act
Which makes the most sense economically?
National specialization
Choices
Necessary because wants are unlimited and resources limited.
A _________ in car prices causes a _________ shift in the demand curve.
No change in demand
Market economy
No government involvement in the economy
Real GDP
Nominal GDP but ADJUSTED for inflation.
REAL GDP
Nominal GDP x price deflator (Nominal GDP/real GDP) is not national income as does not take into account of net property income from abroad or depreciation.
Ethical rules based on morals or concepts of fairness are called:
Normative ethics
NAFTA
North American Free Trade Agreement
Scarcity
Not enough
Productivity
Number of goods/services produced by a worker in a certain time.
The most important cartel in the world today is _____.
OPEC
OPEC embargo
OPEC placed an embargo on U.S. for implementing pro Israel foreign policy. 1973
Market Structures
Oligopoly, Monopoly, Monopolistic.
Nominal Value
One at current prices i.e. not adjusted for inflation
What accounts for the sharp fall in our trade deficit in 2009?
Our imports fell more than our exports.
Sherman Antitrust Act
Outlawed agreements and conspiracies that restrain interstate trade. Made it illegal to monopolize any part of interstate commerce.
Total Revenue Equation
P x Q
Economic Theory
Part of positive economics and is a statement or set of related statements about cause and effect, action and reaction.
Wage
Pay by the hour
Salary
Pay by the week or month
Transfer payments
Payments by government to people who do not currently perform productive services
The free-rider Problem
People are often unwilling to pay for things if they can make use of things that other people have bought.
The Principle of Discounting
People generally prefer to have benefits today rather than in the future. Thus future benefits have to be reduced (discounted) to give them a present value.
Speculators
People who buy (or sell) commodities or financial assets with the intention of profiting by selling them (or buying them back) at a later date at a higher (lower) price.
Interest rate
Percentage of amount borrowed to be added to the amount loaned and paid back
Pin
Personal Identification Number,code used to access private financial info. To make transaction
GOODS
Physical objects such as clothes or shoes.
Debit card
Plastic card used to deduct funds automatically from checking acct
Europe's New Tiger
Poland from 1990-1999
Affirmative Action
Policies and programs which establish targets of increased employment and promotion for women and minorities.
Third World
Poor unindustrialised and developing economies such as Latin American, Asian and Africa countries.
Charles de Gaulle
President of France 1944-1946
Lech Wałęsa
President of Poland 1990-1995, behind economic and political reform in Poland.
Enforces competition
Prevents any producer from becoming a monopoly (the only game in town)
A government-mandated minimum price that must be paid for a good or service.
Price Floor
Demand⬇️
Price⬇️
Characteristics of free enterprise economy
Private property rights Economic decisions based on self-interest Economic decision Economic participation with little government interference Individual choices
4 pillars of free enterprise
Private property, market competition, price system, and enterpreneurship.
Economic Development
Process of improving economic well-being and raising living standards.
Define Allocative Efficiency
Production of the combination of goods and services that provides the most net benefit to society (Socially Optimal) Ex. MB = MC and MC=D
Proportion of Income Elasticity
Products that cost little of your income are inelastic
Advertisement
Promoting a company's product
Balanced-budget Amendment
Proposed constitutional amendment that would require Congress to balance the Federal budget annually.
The Law of Comparative Advantage
Provided opportunity cost of various goods differ in two countries, both of them can gain from mutual trade if they specialise in producing (and exporting) those goods that have relatively low opportunity costs compared with the other country.
5 roles of govt in our economy
Provides goods and services Enforces competition Redistribution income Protects the consumer Stabilizes the economy
Taxation
Provides the means by which Government expenditure is financed
Which market structure is a price taker?
Pure competition
Standard Of Living
Quality of life based on ownership of necessites and luxuries that make life easier.
A system of allocating scarce goods and services by criteria other than price.
Rationing
Business Cycle
Recurring increases and decreases in the level of economic activity over periods of years; consists of peak, recession, trough, and expansion phases.
Redistribution income
Redistributes revenue through social programs like Medicare, social security, welfare
Environmental health and safety standards
Refer to the rules and regulations governing the manufacture and/or selling of certain goods
Leakage
Refers to outflow from a circular flow of income model. In a two sector model, all individual income is sent back to employers when goods and services are purchased, and back to employees through wages and dividends. Occurs when income is taken out through taxes, savings and imports.
'red tape'
Refers to the processes that importers have to go to before their goods are allowed into a country.
New Deal mottos
Relief, Recovery, and reform. Put people to work.
Productive resources
Resources needed to make goods or services
Define Scarcity
Resources that are in limited supply Ex. Pretty Much Everything
First World
Rich industrialised and economically development countries such as the G7.
Competition
Rivalry
Boris Yeltsin
Russian Federation president from 1991-1999. instituted a shock therapy known as Gaidar Reforms
Choice
Selecting item or action from a set of alternatives
Exporting
Selling items to another country
An increase in car prices causes a _________ shift in the demand curve.
Shift to the left
A decrease in car prices causes a _________ shift in the demand curve.
Shift to the right
A production possibility curve (ppc)
Show the maximum combination of goods and services that can be produced by an economy in a given period assuming that all resources in the economy are fully employed and that the state of technology is fixed.
PRODUCTION POSSIBILITIES GRAPH
Shows alternative ways to use an economy's resources.
Income (net property income from abroad)
Shows the difference between the interest, profit & dividend paid to domestic firms/households from abroad and the interest, profit & dividend paid to foreign firms/households operating domestically.
Production Possibilities Curve
Shows the maximum level of efficiency based on what resources are allocated where
Sole trader
Simplest type of business, one person owns and operates the business
Economic Model
Simplified version of a complex concept or behavior expresses in the for of an equation,graph, or illustration.
Which of the following people are more likely to break ethical rules?
Someone who is ignorant
Need
Something an organism/living thing MUST have in order to survive AIR Food WATER Shelter
Want
Something someone would LIKE to have but can survive without it COMPUTERS PHONES GAMES
Renewable resource
Something that can be replace
incentive
Something that encourages greater action or effort, such as a reward
Want
Something we would like to own or have
Abundance
Something where supply exceeds demand at a zero price, i.e, even if it is free there is no shortage.
Wants
Something you would like to have but do not require for your survival. Wants are unlimited.
Investment
Spending by the firm in order to add to their capital stock
Consumption
Spending to acquire consumer goods and services, or using up those goods and services to satisfy wants
Diversification
Spreading out investments to reduce risk
right-to-work laws
State laws that make contracts requiring employees to join a union as a condition of work illegal
Statement 1: Our trade deficit with China is larger than our trade deficit with Japan. Statement 2: Americans pay lower taxes on gasoline than do the citizens of most of the nations in Western Europe.
Statement 1 is true, and statement 2 is false.
If Stephanie buys a laptop for $700 and the maximum she would have paid was $1,000, which of the following is true?
Stephanie received a consumer surplus of $300
Buffer Stocks
Stocks of a product used to stabilise its price. In years of abundance, the stocks are built up. In years of low supply, stocks are released on to the market.
Inventories
Stocks of goods in the hands of producers These stocks are included in the definition of capital and an increase in inventories is considered to be investment
Monopoly
Strictly defined as a market situation in which there is a single supplier of a good or service, but often used to suggest any situation in which a firm has considerable power over market price
Withdrawl
Subtracting $ from an account
Provides goods and services
Such as freeways and disaster relief
Aggregate Supply Shocks
Sudden, large changes in resource costs that shift an economy's aggregate supply curve.
The "bygones" Principle
Sunk (fixed) costs should be ignored when deciding whether to produce or sell more or less of a product.
In free markets which allows a high level of unethical corruption
Suppliers will be forced to be corrupt or to leave the market
A sudden drop in the supply of a good.
Supply Shock
How ill a decrease in price tend to affect supply?
Supply will not change
Any situation in which quantity supplied exceeds quantity demanded.
Surplus (Excess Supply)
Mixed Economy
System combining characteristics of more than one type of economy
Which of the following statements is TRUE?
TRUE: The U.S. government defines and enforces business ethics in order to protect the economy
Jurisdictional disputes and secondary boycotts are prohibited under the _____ Act.
Taft-Hartley
Good
Tangible economic product that is useful, relatively scarce, transferable to others: used to satisfy wants and needs.
specific tax
Tax of a certain amount of money per unit sold. Flat tax, flat rate.
Income tax
Tax on earnings, every worker who earns a certain mat must pay federal income taxes
The first trustbusters were Presidents _____.
Teddy Roosevelt and William Howard Taft
Frictional Unemployment
Temporary unemployment caused by the time required of workers to move from one job to another.
Low level funds
Term to describe the amount of money that is available for firms and households to borrow.
Capital account
That part of the balance of payments accounts which records a country's lending and borrowing transactions
EU
The European Union is an economic-political union of 28 member states that are located primarily in Europe.
Service Commission
The Judicial and Legal Service Commission, the Public Service Commission, the Police Service Commission or the Teaching Service Commission.
Ceteris paribus
The Latin for "other things being equal."
Income Effect
The _________ occurs when an increase in price decreases a consumer's real income.
Entrepreneurship
The ability and willingness to undertake the organization and management of production As well as making the usual business decisions, entrepreneurship is often associated with the functions of innovating and bearing risks
Credit
The ability to get goods or services before payment
Consumption
The act of using goods and services to satisfy wants. This will normally involve purchasing the goods and services.
Arbitrage
The activity of selling one asset and buying an identical or nearly identical asset to benefit from temporary differences in prices or rates of return; the practice that equalizes prices or returns on similar financial instruments and thus eliminates further opportunities for riskless financial gains.
Real Income
The actual number of dollars received (nominal income) adjusted for changes in the CPI.
marginal physical product (MPP)
The amount of additional product that is added to the total when an additional factor (such as another worker) is added
Discretionary income
The amount of an individual's income that is left for spending
Disposable income
The amount of money that households have available for spending and saving after income taxes
Actual Investment
The amount that firms invest; equal to planned investment plus unplanned investment.
A regressive tax
The average rate of tax of individuals or groups will be going down e.g customs and excise duty. Is one where as the variable on which the tax is based rises, people pay a lower proportion of that variable in taxes. Usually indirect taxes e.g customs & excise duty as the burden of taxation falls upon those with the least ability to pay
Macroeconomics
The branch of economic theory concerned with the economy as a whole. It deals with large aggregates such as total output, rather than with the behaviour of individual consumers and firms
SPECIALIZATION
The concentration of the productive efforts of individuals and on a limited number of activities.
scarcity
The condition resulting from the fact that there is not enough of everything to go around (unlimited wants but we have limited resources)
Dynamic Efficiency
The development over time of less costly production techniques, improved products, and new products; technological progress.
Balance of trade
The difference between a country's imports and its exports
Unit elasticity
The divide between elastic and inelastic demand
Actual Reserves
The funds that a bank has on deposit at the Federal Reserve Bank of its district (plus its vault cash).
Wages
The general term applied to the earnings of the factor of production, labour
Poor Infrastructure
The lack of physical capital used for transportation and communication.
Infrastructure
The large scale capital which is necessary for economic activity to take place e.g roads. It will improve the quality of all FOP.
The Fair Labor Standards Act
The law established an minimum wage of 25 cents an hour and an increase to 40 cents after seven years.
scarcity
The limited amount of resources
GDP: Gross Domestic Product
The monetary value of all of a nation's goods and services produced within a nation's borders and within a particular period of time, such as a year. It became the official measure of the U.S. economy in 1991. It replaced "gross national product," which covered all goods and services produced by U.S. residents regardless of where they were working.
Define Law of Increasing Costs
The more of a good that is produced the greater the opportunity cost of the next unit of that good
The Principle of Diminishing Marginal Utility
The more of a product that a person consumes, the less will be the additional utility gained from one more unit.
OPPORTUNITY COST
The most desirable alternative given up as the result of a decision.
Civilian Labor Force
The number of people 16 years of age and older who are employed, or who are actively seeking a job, excluding members of the armed forces, homemakers, discouraged workers, and other persons not in the labor force.
Unemployment
The number of people who are actively looking for work but are currently without a job.
Oath of Allegiance
The oath of allegiance set out in the First Schedule or such other oath as may be prescribed.
Principle
The original amount invested, separate from earnings.
Formula for Income Elasticity of Demand
The percentage (or proportionate) change in demand divided by the percentage (or proportionate) change in income: %ΔQD ÷ %ΔY.
Formula for Cross-price Elasticity of Demand
The percentage (or proportionate) change in demand for good a divided by the percentage (or proportionate) change in price of good b: %ΔQDA ÷ %ΔPB.
rent control
The price ceiling that was used to control the price of housing in New York City and other cities.
Exchange rate
The price of one country's currency in terms of another's
Average Expected Rate of Return
The probability weighted average of an investment's possible future returns.
Identification Problem
The problem of identifying the relationship between two variables (e.g. price and quantity demanded) from the evidence when it is not known whether or how the variables have been affected by other determinants. For example, it is difficult to identify the shape of a demand curve simply by observing price and quantity when it is not known whether changes in other determinants have shifted the demand curve.
entrepreneurship
The process by which individuals called entrepreneurs create new enterprises (businesses) or improve on existing ones.
Governance
The process of making and implementing decisions.
productive resources
The product
A surplus currently exists in the market for apples. Which of the following statements is correct?
The quantity of apples supplied exceeds the quantity demanded and the market price is above the equilibrium price
Cross-price Elasticity of Demand
The responsiveness of demand for one good to a change in the price of another.
Income Elasticity of Demand
The responsiveness of demand to a change in consumer incomes.
Elasticity
The responsiveness of one variable (e.g. demand) to a change in another (e.g. price).
Price Elasticity of Demand
The responsiveness of quantity demanded to a change in price.
Privatization
The selling-off of publicly owned enterprises to private owners
Human capital
The stock of knowledge and acquired skills embodied in individuals
Net immigration
The total number of people leaving the country to take up permanent residence abroad minus the number of people entering the country for the purpose of taking up permanent residence
Consumption C
The total spending on domestic goods or services by households
Annual fee
The yearly charge for having a credit card
Laissez-faire Economics
Theory that opposes governmental interference in economic affairs beyond what is necessary to protect life and property.
Scarce
There is a little bit of a resource.
Substitutes in Supply
These are two goods where an increased production of one means diverting resources away from producing the other.
Goods in Joint Supply
These are two goods where the production of more of one leads to the production of more of the other.
Which statement is true about labor unions in the United States?
They did not gain widespread acceptance until the 1940s.
Services
Things that are done or provided for us
needs
Things we must have to survive like food water and shelter
Producer price index (PPI)
This index measures changes in the prices of the fop and gives an indication of what might happen to a country's CPI in the future.
Input-output Analysis
This involves dividing the economy into sectors where each sector is a user of inputs from and a supplier of outputs to other sectors. The technique examines how these inputs and outputs can be matched to the total resources available in the economy.
Laissez-Faire
This is a hands off approach to a business by the Government
free enterprise
This is a system under which business can be conducted freely with little government intervention. The U.S. system of this also includes such benefits for individuals as investment opportunities and prices that respond to competition.
standard of living
This refers to people's economic well-being. Economists measure a nation's _______________ by how much the average person in that country is able to consume in a given period of time- usually one year.
resource market
This represents the exchange of resources between households-individuals, business firms, and the governments (the users of the resources).
Civil Rights Act of 1964
Title VII of this law outlaws discrimination based on race, color, religion, gender, or national origin in hiring, promoting, and compensating workers.
PRIVATISE
To sell to individuals state-run firms, which are then allowed to compete with one another in the marketplace.
Invest
To use money to earn interest or income or in the hopes of making a profit.
Per capita income
Total income divided by the size of the population
Net investment
Total investment during some accounting period minus the amount of depreciation during the same period
Average Revenue
Total revenue from the sale of a product divided by the quantity of the product sold (demanded); equal to the price at which the product is sold when all units of the product are sold at the same price.
Gross pay
Total wages for total hours worked
Trade Barriers
Trade barriers are usually protectionist; that is, they are erected to protect domestic producers who would not be able to compete successfully with foreign producers in a free market or in free trade.
Rostow's 5 stages of development
Traditional Society: agriculture Transitional Stage: specialisation Take off: Industrialisation Drive to maturity: investment High mass consumption: big service sector
Economic Systems
Traditional, Planned & Free Market Economies.
Commonwealth
Trinidad and Tobago and any country to which section 18 (CoRoTT) applies and any dependency of any such country.
Globalization ensures a more efficient allocation of resources throughout the world.
True
The United States provides smaller agricultural subsidies than does Japan and the European Union.
True
Finance charge
Tue amount of interest you must pat for the credit you use
Complements
Two goods that are bought and used together.
Partnership
Two or more people who own a business
The poverty line is set by the _____.
USDA
Savings
Undertaken by households and is that part of income that is not consumed currently
Involuntary unemployment
Unemployment caused by a deficiency in aggregate demand
Structural Unemployment
Unemployment caused by a mismatch of the skills of workers out of work and the skills required for existing job opportunities.
What happens when wages are set above the equilibrium level?
Unemployment rises
Capital goods
Unlike goods intended to be consumed, capital goods are used to produce other goods Machinery in a factory would be an example of capital goods
How has globalization affected America?
Until now a relatively high proportion of Americans perform high-skill, well paying jobs, while a relatively high proportion of Chinese preform low-skill, poorly paying jobs.
Deduction
Using a theory to draw conclusions about specific circumstances.
EFFICIENCY
Using resources in such a way as to maximize the production of goods and services.
Capital
Usually used in the "real" sense in economics to refer to machinery and equipment, structures and inventories, that is, produced goods for use in further production Distinguished from "financial capital", meaning funds which are available to finance the production or acquisition of real capital
Which of the following is most likely an example of correlation but not an example of causation?
Usually, if I eat chili dog and drink a beer before a game, my team wins
Logging Indicators
Variables that change after real GDP changes.
Co incident Indicators
Variables that change at the same time that real GDP changes.
Leading Indicators
Variables that change before real GDP changes.
Cost-Benefit Analysis
Way of thinking that compares the cost of an action to its benefits.
Which of the following does not specify positive ethical rules?
Webster's dictionary
Opportunity Cost
What a person has to GIVE UP when you choose one thing over another because you don't have enough money for both
The Fallacy of Composition
What applies in one case will not necessarily apply when repeated in all cases.
fundamental questions in economics
What goods and services shall be produced? How should goods and services be produced? Who should receive the good and services produced?
Price
What must be paid to acquire the right to possess and use a good or service
3 questions
What to produce How to produce For whom to produce
Economic Questions
What to produce? How to produce it? For Whom to produce it?
Consumer Expectations
What you expect prices to do in the future can influence your buying habits today.
consumer expectations
What you expect prices to do in the future can influence your buying habits today.
Uncertainty
When an outcome may or may not occur and its probability of occurring is not known.
Absolute Advantage
When one company, person, or country is more efficent at producing the same good than the other.
Inflationary Gap
Will arise when the level of AD in an economy is more than efficient to buy up the potential output that could be produced by an economy at its full employment level of national income.
Downward multiplier effect
Will occur if there is a decrease in an injection and/or an increase in a leakage.
Service
Work or labor performed for someone:economic product that includes haircuts, home repairs, forms of entertainment.
Human capital
Workers in a business or a country
Overdraft
Writing a check for an amount of $ that is more than you have in your account
The expected marginal benefit to you from purchasing a new sport utility vehicle is $20,000. The price of the new sport utility vehicle is $22,000.
You will not purchase the new sport utility vehicle at this time if you are acting rationally
Demand Curve
You would refer to a(n) _________ to find the quantity that a person would purchase at each price that could be offered in a market.
Real/Relative Income
Your income based on its purchasing power
Startup
a beginning business enterprise
Interlocking directorate
a board of directors, the majority of whose members also sere as the board of directors of a competing corporation
partnership
a business owned by 2 or more people
corporation
a business recognized by law that has many of the rights and responsibilities of an individual
Competition
a business relation in which two parties compete to gain customers
consumer
a buyer
The least competitive industry is the one that has _____.
a cartel
If the price of ice cream increases and the quantity demanded decreases, economists would describe this as:
a change in quantity demanded
income effect
a change in the amount of a product that a consumer will buy because the purchasing power of his or her income changes
change in quantity demanded
a change in the amount of product that consumers will buy change in price
Liabilities
a debt or obligation (money owed)
When production costs increase, what affect does it have on supply?
a decrease (shift to the left)
depreciation
a decrease in price or value
A freeze destroys a crop of oranges - what would result on the curve?
a decrease in supply (shift to the left in supply only)
production possibilities frontier
a graph that shows the combinations of output that the economy can possibly produce given the available factors of production and the available production technology
Market
a group of buyers and sellers of a particular good or service
market failure
a situation in which a market left on its own fails to allocate resources efficiently
shortage
a situation in which quantity demanded is greater than quantity supplied
surplus
a situation in which quantity supplied is greater than quantity demanded
equilibrium
a situation in which the market price has reached the level at which quantity supplied equals quantity demanded
utility
ability or capacity of a good or service to be useful and give satisfaction to someone
short run aggregate supply
aggregate supply that varies with the level of demand for goods and services and that is shifted by changes in the cost of factors of production
aggregate
all
Assets
all items to which a business or household holds legal claim
natural resources
all of the parts of the earth that make production possible
Income
all the money a person gets from a job or other source
subsidy ( in the contents of international trade)
an amount of money paid by the Government to a firm, per unit of output, to encourage output and to give the firm an advantage over foreign competition
nest egg
an amount of money saved for a special occasion
Supply and demand
an economic concept that states that the price of a good rises and falls depending on how many people want it (demand) and depending on how much of the good is available (supply)
law of demand
as the price of a good or service rises, the quantity demanded of that good or service falls
law of supply
as the price of a good or services rises, the quantity supplied of that good or service rises
law of increasing costs
as we shift factors of production from making one good or service to another, the cost of producing the second item increases
specialization
assignment of tasks to the workers, factories, regions, or nations that can perform them most efficiently
The entire flow of U.S. dollars and foreign currencies into and out of the country constitutes our _____.
balance of payments
need
basic requirement for survival (food, shelter, water)
barter
bater means to EXCHANGE like toys,cellphons and more stuff
interest
borrowing money
The Chinese economic expansion since the early 1980s and the Japanese economic expansion from the late 1940s through the 1980s were _____.
both dependent on the American market.
Imports would be lowered by _____.
both tariffs and import quotas.
The demand for resources is based on _____.
both the demand for the final product and the productivity of the resource
In 1911 the Supreme Court decided to _____.
break up the trusts
In the long run the monopolistic competitor will be _____.
breaking even
sole proprietorship
business owned and operated by a single person
Supply shocks
collective term to describe any significant interruption/reduction in the supply of a good or service e.g war
union shop
companies can hire nonunion people but they have to join the union when hired
free enterprise
competition is allowed to flourish with a minimum of government influence
Monopoly
complete control of a product or business by one person or group
Substitution Effect
component of the effect of a change in the price of a good upon the amount of that good demanded by a consumer
One measureo f the degree of competitiveness (or of oligopoly) is called a _____.
concentration ratio
By the 1950s and 1960s, the most prevalent type of merger was the _____ merger.
conglomerate
An economy's resources:
consist of land, labor, capital and entrepreneurial skills
7 things that change demand
consumer income, price of good, change of price, what the consumer wants, state of economic, price expectation
The difference between the value of a good to consumers and its price is known as:
consumer surplus
Demand
consumer's desire and willingness to pay a price for a specific good or service
Law of Demand
consumers buy more of a good when its price decreases and less when its price increases
natural monopoly
cost of production lowers when only one company provides it
spillover costs
costs of production that affect people who have no control over how much of a good is produced
fixed cost
costs, or expenses that are the same no matter how many units of a good are produced
Monetary policy
country controls the supply of money
European Central Bank
created in 1998, established the Euro in 2002.
The kinked demand curve depicts _____.
cutthroat competition
When the price of a substitute resource declines, the price of a resource will _____.
decline
Negative incentives:
decrease benefits or increase costs
A market economy depends on market mechanisms to:
determine the most efficient way of using resources
gosplan
determined overall economic plan
production possibilities curve
diagram representing all possible combinations of goods and services an economy can produce when all resources are fully employed
production possibilities curve
diagram representing the maximum combinations of goods and or services an economy can produce resources are fully employed
Price discrimination occurs when a seller charges _____ for the same good or service.
different prices
The function of an entrepreneur is to:
do all of the tasks listed
scarcity
don't have enough resources to produce all the things we would like to have
What determines how much a change in prices will affect total revenue for a firm?
elasticity of demand
Clement Attlee
elected British prime minister in 1945 over Winston Churchill.
An important Supreme Court case involving covert collusion was the _____ case.
electric machinery
Every time an individual decides to try out new equipment, or finds better ways to manage exhibiting traits of:
entrepreneurship
Gallons of milk at a local grocery store are priced at one for $4.00, or two for $6.00. The marginal cost of buying a second gallon of milk:
equals $2.00
If Tim Matray wanted to buy wine from a French merchant, he would pay her with _____.
euros
If you were going to spend time in Italy, France, and Germany, you would be paying for things with _____.
euros
Patent
exclusive right to make, use, or sell an invention for a specified number of ears
Expenses
financial burden; cost (money spent)
According to the theory of the backward-bending labor supply curve, _____.
first the substitution effect sets in, then the income effect.
international reserves
foreign currencies held by governemnts as a result of international trade. reserves may be held so that a government my mantain a desired exchange rate for the country's currencies
scarcity
fundamental economic problem of meeting people's virtually unlimited wants and needs with limited resources
earn
get money in exchange for work
donating
giving money or goods and services with a monetary value to a charitable organization
Compliments
good's demand is increased when the price of another good is decreased
substitutes
goods and services that can be used in place of other goods and services that can be used in place of other goods and services to satisfy consumer wants
import
goods brought in from another country to sell (e.g. cars from Japan sold in America)
inferior goods
goods for which the demand falls when income rises
global
having to do with the whole world
Peak
he phase of the business cycle in which real GDP reaches its maximum after rising during a recovery.
William Henry Beveridge
head of london school of economics
the interaction of supply and demand
helps set prices and quantity produced for most products
population increase will increase demand for ____
housing
Economics
how the world operates through taxes, markets, businesses
Capital Resources
human-made goods used to produce other goods and services
An equal distribution of income would _____.
hurt neither the work incentive nor the incentive to save.
wants
i desire an puppy and an 4-wheeler
elastic demand vs. inelastic
if demand curve is mostly INELASTIC, product is usually a necessity if demand curve is mostly ELASTIC, product is a usually luxury or has a sustitute
In the U.S. today collusion is _____.
illegal and does exist
Receipts
income received form the sale of goods and/or services; also, slips of paper documenting a purchase
The most effective way to increase the productivity of labor would be to _____.
increase capital
economic growth
increase in a nation's total output of goods and services over time
Lance's boss offers him twice his usual wage rate to work tonight instead of taking his girlfriend on a date. This offer will likely:
increase the opportunity cost of going on the date.
Unions have _____.
increased wages
A steel mill raises the price of steel by 20%, which results in a 7% reduction in the quantity of steel demanded. The demand curve facing this firm is:
inelastic
Supply is said to be ____ when the quantity supplied is not very responsive to changes in price
inelastic
The least applicable argument for protecting American industry from foreign competition would be the _____ argument.
infant industry
Gaidar Reforms
instituted by Gorbachev's successor, Boris Yeltsin
services
intangible things (things you can't see or touch) that have value (haircuts, medical care, education)
consumer good
intended for final use by consumers other than businesses
The law demand illustrates a(n) _____ relationship between price and _____
inverse; quantity demanded
natural resources
is a gift of natural , part of the natural environment such as water, trees or minerals
producer
is a person or business who used resources to make goods or provide service
The current supply of Rembrandt paintings:
is perfectly inelastic
demand
is quantity of good or service consumers are willing and able to buy
The most important job of the Federal Trade Commission today is to _____.
issue cease-and-desist orders when anticompetitive business practices occur
Your mother tells you, "Watching ten hours of TV per day will make you stupid." This is a positive statement because:
it is a proposition that can be tested
save
keep or put aside money for the future
the factors of production
land, labor, capital, and entreprenuership
Conglomerate
large corporation made up of smaller corporations dealing in unrelated businesses
Mikhail Gorbachev
leader of ussr from 1985-1991. he dismantled the machinery of central planning but did not replace it with anything.
surplus
leftovers
As interest rates rise _____.
less borrowing will be undertaken
reduce
lessen
Corporate charter
license to operate granted to a corporation by the state where it is established
Plots of land are differentiated mainly with respect to _____.
location
macroeconomics
looks at the big picture. deals with the economy as a whole and decisions made by large units such as government
Economies of scale
low production costs resulting from the large size of output
Product differentiation
manufacturers' use of minor differences in quality and features to try to differentiate between similar goods and services
law of diminishing marginal utility
marginal benefit from using each additional unit of a good or service during a given time period tends to decline as each is used
black market
market in which goods are sold illegally
factor markets
market in which productive resources are bought and sold
competitive market
market in which there are many buyers and sellers so that each has a negligible
Monopolistic competition
market situation in which a large number of sellers offer similar but slightly different products and in which each has some control over price
price ceiling
max. price sellers may charge for a good or service
price ceiling
maximum price that can be legally charged for a good or service
scarcity
means that people need and want more then the resources can provide
GDP
measure of all goods and services in a given time
surplus
more that what is needed
Commanding Heights
most important or strategic elements of an economy, consisting of sectors which produce outputs that are essential for other sectors to operate.
In free market economies,
most market exchanges will result in all parties "winning"
Economic Growth
n expansion in national output measured by the annual percentage increase in a nation's real GDP.
import
name for products brought in from another country
EXPORT
name for products sent to another country
land
natural resources or "gifts of nature", used for production
renewable resources
natural resources that can be replaced ex- plants and animals
nonrenewable resources
natural resources that cannot be replaced ex- mineral ores and fuels
A monopoly is a firm that has _____.
no close substitute
Scarcity
not having enough resources to produce all of the things we would like to have
positive statements
objective statements that can be tested or rejected by referring to the available evidence, dealing with objective explanation and the testing and rejection of theories.
natural resources
objects in nature not touched by hoomans
Right-to-work laws promote the formation of _____.
open shops
nonprofit
operates in businesslike way to promote the interests of its members
Law of Demand
others factors being constant are inversely related to eachother
Productivity is _____.
output per unit of input
When a person possess a comparative advantage in the production of one good or service, it:
permits gains from trade to be realized due to a more efficient use of resources
producer
person or buisness that makes things
Entrepreneur
person who organizes, manages, and assumes the risks of a business in order to gain profits
consumer
person who uses or buys goods or service
equilibrium
point at which quantity demanded and quantity supplied are equal
equilibrium price
point where supply and demand intersect and are balanced
Dividend
portion of a corporation's profits paid to its stockholders
capitalism
private citizens own most if not all of the means of production
Small business incubator
private- or government-funded agency that assists new businesses by providing advice or low-rent buildings and supplies
Voucher Privatization
privatization of large scale industry via voucher auctions
Monopolistic competition differs from perfect competition only with respect to _____.
product differentiation
The most crucial feature of monopolistic competition is _____.
product differentiation
As a result of an increase in a product's price:
product supply does not change, but quantity supplied increases
services
production of work that is performed for someone else
complements
products that can be used together
CCC
put 2.5 million people to work from 1933-1940. maintaining beaches, forests and parks
Investment
putting money into something in order to make a profit
law of demand
quantity demanded and price move in opposite directions
Normal Good
quantity demanded for a particular good
The difference between a change in quantity demanded and a change in demand is that a change in:
quantity demanded is caused by a change in good's own current price, while a change in demand is caused by a change in some other variable, such as income, tastes, or expectations
If the demand is perfectly elastic, what would happen to the quantity demanded if there is a tiny increase in price?
quantity demanded will fall to zero
An increase in the productivity of labor will _____ the MRP of labor.
raise
Diversify
range of products in a business
economic contraction
recession, depression and stagflation
needs
requirements for survival
Total revenue represents the amount that:
sellers receive for a good or service which is computed as PxQ
business cycle
series of periods of expanding and contracting economic health
gosten
set prices
Monnet Plan
set targets and priorities for investment in order to modernize key sectors (commanding heights.)
saving
setting aside a portion of income for a period of time so that it can be used later
Stock
share of ownership in a corporation that entitles the buyer to a certain part of the future profits and assets of the corporation
Stocks
shares of ownership in a company
Common stock
shares of ownership in a corporation that give stockholders voting rights and a portion of future profits (after holders of preferred stock are paid)
A change in demand at EVERY price, will result in a ____
shift in demand
A monopolistic competitor makes a profit only in the _____.
short run
circular flow
shows all economic activity in an economy
market demand curve
shows the data found in the market demand schedule
economies of scale
situation in which the avg cost of production falls as producer grows bigger
Shortage
situation in which the quantity demanded is greater than the quantity supplied at the current price
Elastic demand
situation in which the rise or fall in a product's price greatly affects the amount that people are willing to buy
marginal changes
small incremental adjustments to a plan of action
Limited partnership
special form of partnership in which one or more partners have limited liability but no voice in management
stagflation
stale business activity and inflation of prices
normative statements
statements expressing an opinion about what ought to be; they are subjective statements rather than objective statements - i.e. they carry value judgments.
law of demand
states that price and quantity demanded move in opposite directions
Economic growth
steady growth in the economy
price conscious consumers
strive to pay low prices (1.2% of all consumers)
aggregate demand
sum of all the demand in an economy
aggregate supply
sum of all the supply in an economy
A firm will operatre at that point where _____ is equal to one.
the MRP of the capital/price of capital.
quantity supplied
the amount of a good that sellers are willing and able to sell
Supply
the amount of a product for sale at a certain price
demand
the amount of goods and services people are willing to buy
profit
the amount of money left over and after all the costs of production have been paid
Division of Labor
the breaking down of a job into separate, smaller tasks, which are performed by different workers
If a student enrolls in an additional course at the university, an economist would conclude that:
the expected marginal benefit of an additional course must exceed the expected marginal cost of the course
trade off
the giving up of one thing to obtain something else
law of diminishing marginal utility
the marginal benefit from using each additional unit of a good or service during a given time period tends to decline as each is used
interest
the price of using someone else's money
diminishing marginal utility
the principle that our additional satisfaction or our marginal unity tends to go down as more and more units are consumed
equality
the property of distributing economic prosperity uniformly among the members of society
The Clayton Antitrust Act prohibited each of the following except _____.
trusts
Our balance of trade _____.
turned negative in the mid-1970s.
The acquisitions of Time by Warner and ABC by Walt Disney were examples of _____ mergers.
vertical
closed shop
worker had to belong to a union in order to be hired by a company
modified union shop
workers do not have to join the union after they are hired but they can choose to do so
Adam Smith
wrote the Wealth of Nations; individuals seeking profit end up benefiting society
Formula for Price Elasticity of Supply (arc method)
ΔQS /average QS ÷ ΔP/average P.
About one out of every _____ black Americans is poor.
4
Our largest trade deficit is with_____.
China
The additional cost of producing one more unit of output.
Marginal Cost
NYSE
New York Stock Exchange
Economic growth
Occurs when an economy experiences an increase in real GDP.
Spot Price
The current market price.
Plentiful
There is a lot of a resource.
store of value
ability to retain worth
stockholders
people who buy stock
distribute
spread out
Capital
A borrowers financial assets and net worth
tariff
A tax or duty to be paid on a particular parts of imports or exports.
Incentive
Encourages people to work harder or to produce more
Tort
In law, a private or civil wrong
Property rights
Legal confirmation of ownership (land)
Physical Capital
Machinery
Need
Required for survival
Which is not aimed solely at the poor?
Social Security
Proportional tax
Tax rate stays the same no matter what income level
Bartering
Trading goods instead of paying money
Vera Wang
Wedding dresses
mixed market economy
a market economy that has elements of traditional and command economies
Of these three choices - tariffs, quotas, and free trade - economists like _____ the most and _____ the least.
free trade, quotas
What would best describe our trading relationship with China five years from now?
Our trade deficit will be higher and we will be importing a higher proportion of "high-skill" products.
Take-home pay
Same as net pay
Inflation
A general rise in the level of prices throughout the economy.
Rebate
Is a refund of part of the purchase price.
scarcity
a very small supply
wants
desire for goods and services
ELASTICITY OF DEMAND
A measure how consumers react to a change in price.
revenue
the money a business receives from selling its goods or services
labor
the nation's working force or human resources
The total _____ of industry sales by the four leading firms is the industry concentration.
% market share
Ceteris Paribus
'all other things remaining equal'
Plagiarism is unethical because
(All of the above are reasons) -Plagiarism might result in stealing profits from the original writer -can decrease the value of honest students' diplomas -can make it more difficult for instructors to asses the quality of students' writings -plagiarism is a type of fraud
Ethics violators like embezzlers, frauds, tax cheats and bank robbers
(All of the above may be true) -Usually follow most rules and other ethics most of the time -Not only injure individuals and companies, but also often hurt entire markets -Often use rational cost-benefit analysis when deciding whether or not to cheat -May feel ashamed and guilty of their crimes that they are driven to suicide
Which of the following is true?
(All of the above) -By putting unemployed resources to work of by putting already employed resources to better uses, we could expand output in an economy -To generate increased economic growth, a society would produce fewer consumer goods and more capital goods in the present. -If the production possibility curve is concave from below (that is bowed outward from the origin), it reflects increasing opportunity costs of producing additional amounts of a good. -Increases in a society's output do not make scarcity disappear.
Resources and goods are free to move across state lines. If Oregon producers choose to specialize in producing honey and California producers choose to specialize in growing almonds, then we could reasonablly conclude that:
(All of the above) -California has a comparative advantage in producing almonds -Oregon has a comparative advantage in producing honey -the opportunity cost of growing almonds is lower in California than in Oregon -the opportunity cost of producing honey is lower in Oregon than in California
A student has a chance to see Green Day in concert. The student also has a major economics exam the next morning. If the student goes to the concert:
(All of the above) -she may receive a lower grade on the economics exam -the opportunity cost of the concert is the value of the time spent studying -the decision involves a trade-off
Ethics is defined as:
(Can be defined in any of the ways above) -a branch of philosophy -moral rules or standards governing human conduct, but not necessarily moral rules -the moral principals of an individual person
Why do economists use percentage change to calculate elasticity of demand? *original-new / original (*100)
...
3 Factors that Determine Elasticity of Demand
1. Substitutes 2. Proportion of Income 3. Necessity v Luxury
Adam Smith
1723- 1790; Scottish; "Wealth of Nations"; first economist; "laissez-faire capitalism"; not completely against govt regulation; pro free trade; let individuals pursue own interest.
Wagner Act
1935, legalized union practices
Banking Act
1935, was to provide for the sound, effective, and uninterrupted operation of the banking system.
Walsh Healey Public Contracts Act
1936,8 hour workday, 40 hour work week
Bretton Woods Agreement
1944, aided in rebuilding Europe
Competitive firm
A firm operating under conditions of perfect competition, a market condition in which no individual buyer or seller has any significant influence over price. A competitive firm is a price taker, responding to whatever price is established in the market for its output
What circumstances cause a firm to experience diminishing marginal returns?
A firm with diminishing marginal returns of labor will produce less and less output from each additional costs of labor Workers must work with a limited amount of capital
Average Fixed Cost
A firm's total fixed cost divided by output (the quantity of product produced).
Direct Income Support or Direct Aid
A fixed grant to farmers that does not vary with current output. It may be based on acreage, number of livestock or past output.
Advertising
A seller's activities in communicating its message about its product to potential buyers.
Public good
A shared good or service for which it would be impractical to make consumers pay individually and to exclude non-payers.
Supply Shock
A significant interruption to supply due to an environmental, economic or political event.
Economic Efficiency
A situation where each good is produced at the minimum cost and where individual people and firms get the maximum benefit from their resources.
Tariff
A tax imposed on an imported good
SERVICES
Actions or activities that one person performs for another.
Capital Resources
Actual hard equipment like factories and tractors
marginal utility
Additional use that derived from each unit acquired
AE-DO Approach
Aggregate Expenditures-Domestic Output Approach. Determination of the equilibrium gross domestic product by finding the real GDP at which aggregate expenditures equal domestic output.
AFDC Program
Aid to Families with Dependent Children Program. A state-administered and partly federally funded program in the United States which provides aid to families in which dependent children do not have the support of a parent because of the parent's death, disability, or desertion.
Appreciation (of the dollar)
An increase in the value of the dollar relative to the currency of another nation, so a dollar buys a larger amount of the foreign currency and thus of foreign goods.
Consumer Price Index
An index that measures changes in the average prices of consumer goods and services.
Ad Valorem Tax
An indirect tax of a certain percentage of the price of the good.
Specific Tax
An indirect tax of a fixed sum per unit sold.
Gross income
An individual's total income before taking taxes
The Principle of Cumulative Causation
An initial even can cause an ultimate effect that is much larger.
injection
An injection is an addition to the circular flow that does not arise from households current income
Public Office
An office of emolument in the public service.
Loanable funds
Are that part of a country's money supply that is available for households and firms to borrow.
FACTOR PAYMENT
Are the income people receive for supplying factors of production- land, labor, capital and entrepreneurship.
NNP
As NNI
Bill says: "The imposition of a tax on tequila will increase its price." Bob says, "Taxes should be imposed on tequila because college students drink too much."
Bill's statement is positive, and Bob's statement is normative
Fabians
British socialist who sought to replace the scramble for private gain with collective welfare. founded in 1884
Demand & Supply Curve Shift
Brought about by a change in other determinants.
Demand & Supply Curve Movement
Brought about by a change in price.
Expansionary fiscal policy will likely cause a
Budget deficit
Trading blocs
Contains a group of countries that have joined together in some form of agreement to increase trade between themselves and/or gain benefits from economic co-operation
Abstraction
Elimination of irrelevant and noneconomic facts to obtain an economic principle.
Frictional unemployment
Exists when workers are between jobs. Tends to be short term and people deliberately taking a break between 1 job and the other.
Cyclical /demand deficient unemployment
Exists when workers are out of work due to a lack of aggregate demand within an economy.
Seasonal unemployment
Exists when workers are unemployed due to seasonal factors
Antitrust laws
Government uses these to prevent monopolies and encourage competition in the marketplace.
Unitary Elastic
If the elasticity of demand of a good is equal to 1, it is described as _________.
Substitue Elasticity
If there is no substitute for a good or service, it tends to be inelastic
Income
Increased income means people can by more. Decreased income means people can buy less.
Import push inflation
Increases in the costs of imported components, capital or raw materials, increasing fcop.
Wage push inflation
Increases in the price level due to increases in the cost of labour.
Board of directors
Individuals chosen by shareholders in a corporation to administer the affairs of the business
contracts
Individuals have the right to enter into agreements with one another to buy and sell goods and services- these agreements are called this.
Deregulation
Involves removing many of the rules and regulations under which firms operate.
Privatisation
Involves returning previously nationalized industry to the private sector
A patent
Is a firm that has the right to be the sole supplier of a good for a fixed period.
Depreciation
Is a monetary value that measures the rate at which a country's capital stock declines over time as a result of wear and tear and/or obsolescence
A weight
Is a number attached to a variable to show its relative importance.
Index number
Is a number that measures the average value of a set of related numbers expressed as a percentage of the average value of a base year.
WANT
Is an item that we desire but that is not essential for survival.
Free enterprise economy
Is where goods and services are exchanged openly and freely with little government intervention
How does the marginal product of labor change as more people are hired?
It will increase as long as the benefits of specialization are in tact and the rate at which a firm produces a product increases.
budget
It's a way of keeping track of exactly how much money is coming in and exactly how much money is going out.
Capital Inflow
The expenditures made by the residents of foreign nations to purchase real and financial capital from the residents of a nation.
Equity
May be used in either of two unrelated senses. In the context of income distribution theory, refers to an objective, goal or principle implying "fairness." In a financial context may refer to a share or portion of ownership
Injection
Means an introduction of income into the flow.When households and firms borrow the savings,they constitute injections.Injections increase the flow of income.Examples: (a) investment,(b) government spending and (c) exports.
Factor Cost
Means that the value has been measured in terms of its cost of production (i.e the factor incomes-rent, wages, interest and profit- pays to the factors of production
Market prices
Means the value has been measured in terms of its cost to purchase, that is factor cost + any indirect taxes - any subsidies which have caused prices to fall
Human Development Index (HDI)
Measure of living standards including: Health, Education and GNI per capita.
Portfolio investment
Measures the difference between domestic purchases of foreign treasury bills, foreign bonds, foreign financial derivatives and domestic contributions to foreign savings accounts AND foreign purchases of domestic treasury bills, domestic bonds, domestic financial derivatives and foreign contributions to domestic saving account.
Reserved assets
Measures the difference between the movement of a country's currency and gold into foreign countries and the movement of foreign currencies and gold into domestic country
Unemployment
Measures the number of people within a country's labour force who are without work.
What is a surplus?
More money than needed.
Economic Bads
More production means a larger GDP, regardless of the level of pollution created in the process.
Balance-of-payments Deficit
The amount by which inpayments from a nation's stock of official reserves are required to balance that nation's capital and financial account with its current account (in its balance of payments).
Deflation
Occurs when the rate of inflation is negative and there is a fall in the average price level of an economy during a given period.
Disinflation
Occurs when the rate of inflation is positive but falling.
Disequilibrium unemployment
Occurs when there are any conditions that prevent the labour market from "clearing" that is reaching the labour market equilibrium. 2 types.
The market ethics that have been discussed in this section are:
Positive
Balance-of-payments Surplus
The amount by which outpayments to a nation's stock of official reserves are required to balance that nation's capital and financial account with its current account (in its international balance of payments).
Primary sector
Sector working in agriculture
Self-fulfilling Speculation
The actions of speculators tend to cause the very effect that they had anticipated.
Budget Surplus
The amount by which the revenues of the Federal government exceed its expenditures in any year.
Progressive tax
The average rate of tax of individuals or groups will be going up Is one where the variable on which the tax is based rises, people pay a higher proportion of that variable in taxes. E.g income tax in U.K Proportional tax
Macroeconomics
The branch of economics that studies economics that studies economic aggregates (grand totals): e.g. the overall level of prices, output and employment in the economy.
Microeconomics
The branch of economics that studies individual units: e.g. households, firms and industries.
Elasticity of Supply
The change in price causes a large change in supply
Price Inelastic
The change in price doesnt not cause a substantial change in supply or demand
Adjustable Pegs
The device used in the Bretton Woods system to alter exchange rates in an orderly way to eliminate persistent payments deficits and surpluses. Each nation defined its monetary unit in terms of (pegged it to) gold or the dollar, kept the rate of exchange for its money stable in the short run, and adjusted its rate in the long run when faced with international payments disequilibrium.
Balanced-budget Multiplier
The extent to which an equal change in government spending and taxes changes equilibrium gross domestic product; always has a value of 1 since it is equal to the amount of the equal changes in G and T.
Scarcity
The fact that human wants exceed the means of satisfying them
Stabilizes the government
The federal government regulates the economy with our monetary and fiscal policies
Axes
The fixed lines on a graph which carry the scales against which the coordinates are plotted
market
The free exchange of goods and services is referred to as this. This provides the only form of control over what goods and services are bought and sold.
long run aggregate supply
The relationship between the quantity of real GDP supplied and the price level when the money wage rate changes in step with the price level to achieve full employment.
Market demand
The relationship between the total quantity of a good demanded and its price
Price discrimination
The selling of a good or service at different prices to different buyers or classes of buyers in the absence of any differences in the costs of supplying it
Board of Governors
The seven-member group that supervises and controls the money and banking system of the United States; the Board of Governors of the Federal Reserve System; the Federal Reserve Board.
Full Employment
The situation in which an economy operates at an unemployment rate equal to the sum of the frictional and structural unemployment rates. Also called the natural rate of unemployment.
Where would you go to make a small claim (Up to 2000 euro)
The small claims court.
Which of the following represents a normative statement?
The study of economics is more important than the study of history
mixed economy
This is an economy that combines elements of traditional, market, and command economic models to answer the three basic economic questions. The three main categories of this type of economy are authoritarian socialism, capitalism, and democratic socialism.
traditional economy
This is an economy that is based on a society's values- its customs and traditions. The people answer the the three basic economic questions by looking in the past.
Demand
This is how many consumers want a particular good
incentive
This is something that encourages a person to behave in a particular way.
competition
This is the economic rivalry that exists among businesses selling the same or similar products.
self-interest
This is the impulse that encourages people to fulfill their needs and wants.
full employment
This is the lowest possible level of unemployment in the economy.
product market
This is what represents all the exchanges of goods and services in the economy.
The Labor Management Relations Act of 1947
This law requires labor unions to negotiate their demands with employers.
Aggregate Demand AD
Total spending on goods and services in an economy at a given price during a given period Slopes downwards due to inverse relationship. = C + I + G + (X-M) Components of AD C, I, G, (X-M)
Full economic integration
When a common market with a common currency has common macro-economic policies
Profit
When a firm's revenues exceed its costs, profit is the difference between the two
Absolute Advantage
When a person can create more of something
Deflationary Gap
Will arise when the level of aggregate demand in an economy is insufficient to purchase the potential output that could be produced by an economy at its full employment level of national income. Leads to increase in unemployment
Upward multiplier effect
Will occur if there is a increase in an injection and/or an decrease in a leakage.
supply curve
a graph that shows the amount of a product that would be supplied at all possible prices in the market
Assume the demand schedule for cookies is downward sloping. If the price of cookies falls from $2.50 to $2.25 per dozen:
a larger quantity of cookies will be demanded
price ceiling
a legal maximum on the price at which a good can be sold
Merger
a combined company that results when one corporation buys more than half the stock of another corporation and, thus, controls the second corporation
A downward sloping straight-line production possibilities curve implies:
a constant opportunity cost
depreciation
a decrease in value
Assume a price floor is imposed in the wheat market at the equilibrium price and that a price ceiling is imposed in the gasoline market at the equilibrium price. An increase in supply in both the wheat and gasoline markets will create:
a surplus in the wheat market and an increase the quantity of gasoline traded.
economy
a system for management of resources and buisness
open opportunity
ability of everyone to freely enter and exit the market
A monopoly is a firm that produces _____.
all the output in an industry
resource (s)
all the things that can be used in making products or services that people want
Cartel
arrangement among groups of industrial businesses to reduce international competition by controlling the price, production, and distribution of goods
an economic hypothesis is tested:
by comparing the hypothesis's predictions to real-world data
In the late 19th century trusts were formed. They were _____; the largest trust was the _____ trust.
cartels, stranded
Most strikes _____.
cause widespread economic disruption
Marginal thinking is best demonstrated by:
choosing to spend one more hour studying economics because you think the improvement in your score on the next quiz will be worth the sacrifice of time
positive statements
claims that attempt to describe the world as it is
normative statements
claims that attempt to prescribe how the world should be
disequilibrium
describes any price or quantity not at equilibrium; when quantity supplied is not equal to quantity demanded in a market
want
desires that can be met by getting a product or a service
cost benefit analysis
economic model that compares the marginal costs and marginal benefits
Law of demand
economic rule sating that the quantity demanded and price move in opposite directions
Substitution effect
economic rule stating that if two items satisfy the same need and the price of one rises, people will buy the other
oligopoly
industry dominated by a few suppliers who exercise some control over price
services
it's work done and u pay them an fee
price floor
min price buyers must pay for a good or service
price floor
minimum price for a good or service
minimum wage
minimum price that an employer can pay a worker for an hour of work
modified free enterprise
mixed economy that includes some govt protection and regulation
Gross Domestic Product (GDP)
monetary value of all new and final goods and services, produced within a countries borders in a twelve month period
change in demand
occurs when a change in the marketplace such as high unemployment prompts consumers to buy different amounts of a good or service at every price
Dumping
occurs when a firm or Government sells a good or service in another country at a loss in order to improve cash flow/reduce competition
Judicial Committee
the Judicial Committee of the Privy Council established by the Judicial Committee Act 1833 of the United Kingdom as from time to time amended by any Act of Parliament of the United Kingdom.
market power
the ability of a single economic actor (or small group of actors) to have a substantial influence on market prices
property rights
the ability of an individual to own and exercise control over scarce resources
Doctors ear more than people in other professions basically because _____.
they are in short supply relative to the demand for their services
Incentives
things that incite or motivate
wants
things we would like to have such as entertainment, vacations
Assets
things you own, such as cash, real estate, equipment, inventory. (Something owned that has value)
Post war motto for France
thirty glorious years
borrow
to take and then pay back
opportunity cost
cost of the next best use of your time or money when you choose to do one thing rather than another
Financial trade areas (FTAs)
Is an association of a number of countries between whom all barriers to trade are removed but where each country has the right to raise its own barriers to trade against any country outside of the association.
Mixed economy
Is an economy that combines elements of traditional, command and market economies and where consumers and producers can freely interact with the econony, but may be subject to some government regulations or intervention
A fixed exchange rate
Is an exchange rate regime where the value of a currency is fixed, or pegged, to the value of another currency, to the average value of a selection of currencies, or to the value of some other commodity such as gold.
Terms of trade
Is an index that shows the value of a country's average export prices relative to it average import prices
CAPITAL
Is any human-made resource that is used to produce other goods and services.
COMMUNISM
Is characterized by a centrally planned economy with all economic and political power resting in the hands of the central government.
Incentive
Is something that motivates an individual to perform an action; it is central to the study of all economic activities (both in terms of individual decision-making and in terms of co-operation and competition within a larger institutional structure).
Economics
Is the study of how society satisfies peoples unlimited and competing wants and needs with the careful use of scare resources
Aggregate Supply
Is the total production of goods and services in an economy at a given price in either the short run or the long run
cooperative
a voluntary association of people formed to carry on some kind of economic activity that serves to benefit its members
credit agreement
a written promise to repay something that is borrowed
The term "ceteris paribus" means that:
all variables except those specified are constant
strike
all workers in the union refuse to go to work
Price _____.
always read off the demand curve
The price elasticity of demand coefficient for gourmet coffee is estimated to be equal to 1.6. It is expected, therefore, that a 5% increase in price would lead to:
an 8% decrease in the quantity of gourmet coffee demanded
Marginal utility
an additional amount of satisfaction
market economy
an economic system in which individuals and businesses own all resources and make economic decisions on the basis of price
capitalism
an economic system in which private citizens own and use the factors of production in order to seek a profit
market economy
an economic system in which supply, demand, and prices help people make decisions and allocate resources
command economy
an economic system in which the government makes the major economic decisions
Command Economy
an economy in which production, investment, prices, and incomes are determined centrally by a government.
market economy
an economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services
Debit
an entry on the left side of an account - increases assets or decreases liabilities.
Credit
an entry on the right side of an account - decreases assets or increases liabilities.
variable costs
an expense that varies (changes) depending on how much a business produces
depression
an extended period of high unemployment and limited business activity
The monopolist _____.
an imperfect competitor and has a downward sloping demand curve
Hurricane Sandy hits New York and the city loses power - what would result on the curve regarding flashlights?
an increase in demand (shift to the right in demand only)
Balance Sheet
an official financial statement that includes the company's assets and liabilities. It determines the value of the company by subtracting liabilities from assets.
paradox of value
apparent contradiction between the high value of a nonessential item and the low value of an essential item
The job of an _____ is to impose a settlement.
arbitrator
services
are activities people do for a fee
Capital resources
are goods made by people and used to produce goods and services. Examples are machines, tools, and buildings.
For a given increase in price, a greater elasticity of demand will result in a greater
decrease in quantity demanded
Franchise
contract in which one business (the franchiser) sells to another business (the franchisee) the right to use the franchiser's name and sell its products
An increase in the price of inputs used to produce good A will:
decrease supply, increase price and decrease the quantity exchanged.
If the price of the ice cream increases substantially (ceteris paribus), the equilibrium quantity of hot fudge sauce, a complement, is likely to
decrease, and the equilibrium price of hot fudge sauce is likely to decrease
Inferior Good
decreases in demand when consumer income rises
A demand curve of an imperfect competitor slopes _____.
down to right
Demand curve
downward sloping line that shows in graph form the quantities demanded at each possible price
Real income effect
economic rule stating that individuals cannot keep buying the same quantity of a product if its price rises while their income stays the same
recession
economic slowdown of the economy which results in rising unemployment, increased business failures, declining economic growth and higher personal bankruptcies; represented as a trough on a trade cycle
When the demand for a plot of land rises, _____.
its price will rise
The law of comparative advantage states that the total output is greatest when each product is made by the country that has the _____.
lowest opportunity cost
free enterprise economy
market economy in which privately owned businesses have the freedom to operate for a profit with limited government intervention
product markets
market in which goods and services are bought and sold
Monopoly
market situation in which a single supplier makes up an entire industry for a good or service with no close substitutes
Perfect competition
market situation in which there are numerous buyers and sellers, and no singel buyer or seller can affect price
monopolistic competition
market structure in which many sellers offer similar but not standardized products to consumers
product markets
markets where producers offer goods and services for sale
natural resources
materials obtained from land, sea, and air can be renewable or nonrenewable
currency
money of a country
charity
money or other help given to aid people in need.
debt
money owed in exchange for loans or for goods or services purchased with credit
discretionary income
money spent after paying for all the necessities
income effect
the change in consumption resulting from a change in real income
marginal revenue
the change in total revenue that results from selling one more unit
law of supply and demand
the claim that the price of any good adjusts to bring the quantity supplied and the quantity demanded for that good into balance
warranty
the promise made by a seller to repair or replace a product within a certain time if its faulty
efficiency
the property of society getting the most it can from its scarce resources
standard of living
the quality of life based on the possession of necessities and luxuries that make life easier
standard of living
the quantity and quality of goods and services available to an individual or society
Whenever there is a surplus at a particular price, the quantity sold at that price will equal:
the quantity demanded at that price
productivity
the quantity of goods and services produced from each unit of labor input
Corporation
type of business organization owned by many people but treated by law as though it were a person; it can own property, pay taxes, make contracts, and so on
market economy
type of economy where people decide what to make, what to buy and what to sale
command economy
type of economy where the govt. decides what to produce how to produce it and for whom to produce it to
The monopolist produces _____.
where MC equals MR
Surplus Value
(in Marxian economics) the part of the value of a commodity that exceeds the cost of labor, regarded as the profit of the capitalist.
Which would be the most accurate statement with respect to our chemical industry?
It is on the decline and now contributes to our balance of trade deficit.
tariff
a tax placed on goods when they are imported form one country to another country
right to work laws
prevents unions from forcing workers to join
Market economy
price and production is controlled by buyers and sellers freely operating business
rent control
price ceiling placed on rent
target price
price floor for agricultural products set by the government to stabilize farm income
U.S. Steel and a few cigarette companies were all engaged in _____ to attain their economic ends.
price leadership
total costs
price of fixed costs plus variable costs
Deregulation
reduction of government regulation and control over business activity
A good economic theory:
relies on simplifying assumptions in order to explain economic behavior
The superrich get most of their income from _____.
rent, interest, and profits.
Unlimited liability
requirement that an owner is personally and fully responsible for all losses and debts of a business
Required reserves
reserves that a bank is legally required to hold, based on its checking account deposits
factors of production
resources necessary to produce goods and services
incentive
rewards that are offered to try to persuade people to take certain economic actions
When the demand for wheat rises, the demand for far labor _____.
rises
saving
setting aside money for future use
cost-benefit analysis
shows the gain and the cost of an action
Beveridge Report
slay want, disease, ignorance, squalor, and idleness. written by William Henry Beveridge
6 Factors that change demand
1. Income 2. Market Size 3. Consumer Tastes 4. Consumer Expectations 5. Substitute Goods 6. Complementary Goods
Marshall Plan
1948, U.S. gave 12 billion dollars to Europe to help them rebuild
Treaty of Rome
1957. established Common market
rationing
A fixed portion
_____ was the last year in which we ran a trade surplus.
1975
We became a debtor nation in _____.
1985
Privatization for Cash
1995, russian government shifted focus to privatization for cash to dispose of remaining assets
About _____ million Americans are homeless.
2 to 3
About _____ percent of all poor people are black.
25
Monetary policy
A form of government regulation in which the nation's money supply and interest rates are controlled.
oppurtunity cost
A benefit of something that must be given up to achieve something else.
What is an SSB?
A business needed by the public, funded by the government (ESB, An Post)
Cooperative
A business that is owned by the members it serves and is managed in their interest.
Bonds
A certificate issued by a government or private company which promises to pay back with interest the money borrowed from the buyer of the certificate.
Business
A commercial way to make an income
Comparative advantage
A country is said to have a comparative advantage in the production of a good or service if it can produce it at a lower opportunity cost than another country
Absolute advantage
A country is said to have an absolute advantage in the production of a good or service if it uses fewer resources than another country
Production Possibility Curve
A curve showing all the possible combinations of two goods that a country can produce within a specified time period with all its resources fully and efficiently employed.
Urbanized Area
A densely settled core of census block groups and surrounding census blocks that meet minimum population density requirements.
Demand Deposit
A deposit in a commercial bank or thrift against which checks may be written; a checkable deposit.
Circuar Flow
A diagram showing the exchange of money and resources between households and businesses.
Limited Liability
A fundamental feature of corporations, whereby investors are liable only up to the amount of their investment.
General Election
A general election of members to serve in the House of Representatives.
inflation
A general increase in prices and fall in the purchasing value of money
Inflation
A general rise in the average level of all prices
Normal Good
A good whose demand rises as people's incomes rise.
Transfer Payment
A government payment to individuals not in exchange for goods or services currently produced.
demand curve
A graph of the relationship between the price of a good and the quantity demanded.
Demand Curve
A graph showing the relationship between the price of a good and the quantity of the good demanded over a given time period. Price is measured on the vertical axis; quantity demanded is measured on the horizontal axis. A demand curve can be for an individual consumer or group of consumers, or more usually for the whole market.
Conglomerate Combination
A group of plants owned by a single firm and engaged at one or more stages in the production of different products (of products that do not compete with each other).
COLLECTIVE
A large farm leased from the state to groups of peasant farmers.
Existing Law
A law that had effect as part of the law of Trinidad and Tobago immediately before the commencement of this Constitution and includes any enactment referred to in subsection (1).
Perfect Competition
A situation where the consumers and producers of a product are price takers.
Bankrupt
A legal situation in which an individual or firm finds that it cannot make timely interest payments on money it has borrowed. In such cases, a bankruptcy judge can order the individual or firm to liquidate (turn into cash) its assets in order to pay lenders at least some portion of the amount they are owed.
Quota
A limitation on the amount of a good that can be produced or offered for sale domestically or internationally
rationing
A limited portion or allowance of food or goods; limitation of use
Futures or Forward Market
A market in which contracts are made to buy or sell at some future date at a price agreed today.
Natural monopoly
A market situation in which economies of scale are such that a single firm of efficient size is able to supply the entire market demand
Green GDP
A measure that attempts to take into account any external/environmental costs incurred from the production of the goods and services represented by GDP = GDP- any external costs
Price Chain Price Index
A measure that compares changes in the prices of all final goods during a given year to the prices of those goods in a base year.
Built-in Stabilizer
A mechanism that increases government's budget deficit (or reduces its surplus) during a recession and increases government's budget surplus (or reduces its deficit) during an expansion without any action by policymakers. The tax system is one such mechanism.
Define Mixed Economy
A mix of command economy and market economy Ex. U.S. as it is today
The 'Lewis Model'
A model where employment is split between an agricultural and an urban sector. It shows the transfer of surplus labour from the rural area into the city to seek better wages.
Character
A northward responsible handling of past debt as well as stanililty in a job and residence
Agency Shop
A place of employment where the employer may hire either labor union members or non-members but where those who do not join the union must either pay union dues or donate an equivalent amount of money to a charity.
Certificate of Deposit (CD)
A savings alternative in which money is left on deposit for a stated period of time to earn a specific rate of return.
Aggregate Expenditures Schedule
A schedule or curve showing the total amount spent for final goods and services at different levels of real GDP.
Productive Efficiency
A situation where firms are producing the maximum output for a given amount of inputs, or producing a given output at the least cost.
Allocative Efficiency
A situation where the current combination of goods produced and sold gives the maximum satisfaction for each consumer at their current levels of income. Note that a redistribution of income would lead to a different combination of goods that was allocatively efficient.
Micropolitan Area
A smaller version of a metropolitan area with a concentration of one fifth to the minimum amount for a metropolitan area.
Social Darwinism
A social theory which states that the level a person rises to in society and wealth is determined by their genetic background.
Set-aside
A system in the EU of paying farmers not to use a certain proportion of their land.
proportional tax
A system in which all levels of income are taxed at the same rate.
Capitalism
A system of economic organization characterized by the private ownership of the means of production, private property, and largely market-based control over the production and distribution of goods and services
Demand Schedule for an Individual
A table showing the different quantities of a good that a person is willing and able to buy at various prices over a given period of time.
Supply Schedule
A table showing the different quantities of a good that producers are willing and able to supply at various prices over a given time period. A supply schedule can be for an individual producer or group of producers, or for all producers (the market supply schedule).
Market Demand Schedule
A table showing the different total quantities of a good that consumers are willing and able to buy at various prices over a given period of time.
Demand Schedule
A table that shows the quantity demanded at each price.
ad valorem tax
A tax levied according to the value of the property
Resources
All those things which can be used to produce economic satisfaction
A tax credit
Allows firms not to pay tax on money that is being used for a certain investment.
supply
Amount of goods businesses are willing to make and sell
Net pay
Amount of wages received after all deductions have been taken into account
Incentives
An action or reward that motivates one to act a certain way.
Central bank
An agency empowered by a government to manage a country's monetary and financial institutions, issue and maintain the domestic currency, and handle the official reserves of foreign exchange Primarily a "bank for banks."
Census Block
An area bounded on all sides by visible features (street, streams, or tracks) or invisible features (property lines or political boundaries). Typical census block has between a few dozen and a few hundred residents.
Municipality
An area over which a municipal corporation exercises political authority and provides local government services such as sewage service, crime protection and fire protection.
MARKET
An arrangement that allows buyers and sellers to exchange things.
Customs union
An association of a number of countries between whom all barriers to trade have been removed and where each country raises common barriers to trade against any country outside the association
Authoritarian Capitalism
An economic system in which property resources are privately owned and government extensively directs and controls the economy.
Traditional
An economic system in which the allocation of scare resources and other economic activity is the result of ritual, habit, or custom
Market
An economic system in which the supply, demand and price system help people make decisions and allocate resources (known as free-enterprise economy)
FREE ENTERPRISE
An economic system that permits the conduct of business with minimal government intervention.
Break-even Point
An output at which a firm makes a normal profit (total revenue total cost) but not an economic profit.
Money
Anything generally acceptable in exchange Money serves a number of functions: it is a medium of exchange, it is used as a unit of account, and it can be used as a store of value In its latter use, it is an alternative to holding value in the form of goods or other types of financial assets such as stocks or bonds
Resource
Anything used to produce a good or service.
AUTHORITARIAN
Authoritarian government exact strict obedience from their citizens and do not allow individuals freedom of judgements and action.
AVC
Average Variable Cost is A firm's total variable cost divided by output (the quantity of product produced).
Capital flight
Citizens/businesses send their money aboard buying foreign currency/assets.
Merger
Combination of two or more companies into a single firm
Capital account
Composes of capital transfers and transactions in non-produced, non-financial assets
CENTRALLY PLANNED ECONOMIES (command economies)
Economic system in which the central government makes all decisions on production and consumption of goods and services.
TRADITIONAL ECONOMY
Economic system that relies on habit, customs or ritual to decide questions of production and consumption of goods and services.
An expense that costs the same whether or not a firm is producing a good or service.
Fixed Cost
What categories of costs combine to create a firm's total cost?
Fixed costs and variable costs
Balance on Current Account
The exports of goods and services of a nation less its imports of goods and services plus its net investment income and net transfers in a year.
Standard of Living
Illustrates what opportunities are expected for a certain person
SCARCITY
Implied limited quantities of resources to meet unlimited wants.
Liabilities
In general, debts owed by individuals or firms. In the case of commercial banks, their liabilities are largely in the form of what they owe their customers, that is, the total amount of deposits held
Balance of payments
Is a record of the value of all the trading transactions between 1 country and the rest of the world during a given period
SOCIALISIM
Is a social and political philosophy based on the belief that democratic means should be used to distribute wealth evenly throughout a society.
DEMAND SCHEDULE
Is a table that lists the quantity of a good that a person will purchase at each price in a market.
Consumer price index ( CPI)
Is a weighted average of the price changes which makes use of index numbers from which the monthly or annual rate of inflation can be expressed as a percentage. CPI = sigma (index number x weight) Sigma (weight)
Services
Jobs that one person does for another. teachers Coaches, Doctors, Auto repair are all services
Asian Tigers
The newly industrialized and rapidly growing economies of Hong Kong, Singapore, South Korea, and Taiwan.
opportunity cost
The next best option
The Problem of Time Lags
Many economic actions can take a long time to take effect. This can cause problems of instability and an inability of the economy to achieve social efficiency.
Voluntary exchange
a transaction in which a buyer and a seller exercise their economic freedom by working out their own terms of exchange
Which of the following market structures have economic profits competed away by new firms entering the industry in the long run?
Monopolistic competition and pure competition
In the long run, economic profits are possible in which market structures?
Monopoly and oligopoly
Monetary union
Occurs when a common market adapts a common currency with a common central bank
Recession
Occurs when a country experiences 2 or more consecutive quarters of negative real GDP
DISEQUILIBRIUM
Occurs when quantity supplied is not equal to quantity demanded in a market.
Trade creation
Occurs when the entry of a country into a customs union leads to the production of a good or service transferring from a high cost producers to a low cost producer
Trade diversion
Occurs when the entry of a country into a customs union leads to the production of a good or service transferring from a low cost producer to a high cost producer
Real Value
One at historic prices i.e. adjusted for inflation
circular-flow diagram
a visual model of the economy that shows how dollars flow through markets among households and firms
Market-clearing pice
Price determined by buyers and sellers, an agreement.
Production Sectors
Primary, Secondary & Tertiary.
Equilibrium
Quantity supplied meets quantity demanded. Disequilibrium- Not in a state of equilibrium
What happens to a market in equilibrium when there is an increase in supply?
Quantity supplied will exceed quantity demanded, so the price will drop. (surplus)
Wants
The apparently limitless desires or wishes people have for particular goods or services
Clayton Act
Restricted price discrimination-the practice of selling the same good to different buyers at different prices. Prohibited sellers from requiring that a buyer not deal with a competitor. Outlawed interlocking directorates between competitors. Outlawed mergers that lessen competition substantially.
Real Take Home Pay
Salary that includes what is lost to inflation
The financial and opportunity costs consumers pay in searching for a good or service.
Search costs
Current account
Shows the value of all trading transactions between a country and the rest of the world in goods, services, income and current transfers
Constant dollars
Sometimes called "real dollars," to refer to price data which have been adjusted to remove the effect of changes in the general level of prices
Transfer Payments
Spending by the Government in order to increase the incomes of households and/or firms e.g unemployment benefits
Indirect taxes
Taxes levied on a producer which the producer then passes on to the consumer as part of the price of a good Distinguished from direct taxes, such as sales taxes which are visible to the person who pays them
Nominal Income
The actual number of dollars received over a period of time.
Anticipated Inflation
The apportionment of resources among firms and industries to obtain the production of the products most wanted by society (consumers); the output of each product at which its marginal cost and price or marginal benefit are equal, and at which the sum of consumer surplus and producer surplus is maximized.
Opportunity Cost
The cost of any activity measured in terms of the best alternative forgone.
derived demand
The demand for factors of production hat results from the demand for a product or service.
Balance Deposits
The deposits that individuals or firms have at banks (or thrifts) or that banks have at the Federal Reserve Banks.
GDP Gap
The difference between actual real GDP and potential or full- employment real GDP.
National income
The general term used to refer to the total value of a country's output of goods and services in some accounting period without specifying the formal accounting concept such as Gross Domestic Product
Formula for Price Elasticity of Demand
The percentage (or proportionate) change in quantity demanded divided by the percentage (or proportionate) change in price: %ΔQD ÷ %ΔP.
Formula for Price Elasticity of Supply
The percentage (or proportionate) change in quantity supplied divided by the percentage (or proportionate) change in price: %ΔQS ÷ %ΔP.
Benefit-reduction Rate
The percentage by which subsidy benefits in a public assistance program are reduced as earned income rises.
Rate of Inflation
The percentage increase in the level of prices over a 12-month period.
Unemployment Rate
The percentage of people in the civilian labor force who are without jobs and are actively seeking jobs.
equilibrium wage rate
The percentage of people, 16 years of age or older who could work, who are either working or looking for work
Consumer Tastes
The popularity of a good or service has a strong effect on the demand for it.
Agribusiness
The portion of the agricultural and food product industries that is dominated by large corporations.
Marketing
The practice of promoting, advertising, and presenting a product in order to increase its sales.
Total Consumer Expenditure on a Product (TE) (per period of time)
The price of the product multiplied by the quantity purchased: TE = P × Q.
Interest
The price of using credit
Interest rate
The price of using credit expressed as a percentage of the amount owed
Investment
The production of items that are not for immediate consumption.
Human Capital
The productive skill in human beings, education and training.
MRT - Marginal rate of taxation
The proportion of an extra pound of income that households will have top pay in direct taxes to the Government.
Law of Demand
The quantity of a good demanded per period of time will fall as price rises and will rise as price falls, other things being equal (ceteris paribus).
Natural rate of unemployment
The rate of unemployment that would exist when the economy is operating at full capacity. It would be equal to the amount of frictional unemployment in the system
Social cost
The real cost to society of having a good or service produced, which may be greater than the private costs incorporated by the producer in its market price
Actual Deficit
The size of the Federal government's budget deficit actually recorded in any particular year.
economics
The study of how people and societies use limited resources to satisfy their unlimited wants.
economics
The study of how people use scarce resources to make goods
Define Economics
The study of how people, firms, and societies use their scare productive resources to best satisfy their unlimited material wants
Economics
The study of how society manages its scare resources to attain its unlimited wants.
Economics
The study of how we produce and distribute our wealth.
Gross National Expenditure (GNE)
The sum of all spending on consumption and investment plus government spending on goods and services and net exports (total exports minus imports) It is equivalent in value to GDP
Balance on Capital & Financial Account
The sum of the capital account balance and the financial account balance.
Double Taxation
The taxation of both corporate net income (profits) and the dividends paid from this net income when they become the personal income of households.
Diminishing returns
The tendency for additional units of a productive factor to add less and less to total output when combined with other inputs which are to some degree fixed in quantity Combining more of a variable input, such as labour, with a given amount of some other input, such as capital in the form of a machine, will eventually result in the marginal product for labour declining
LAW OF SUPPLY
The tendency of suppliers to offer more of a good at a higher price.
Communism
Think China, Cuba
Democratic
Think U.S., Japan, Germany
Tribal
Think native americans
price stability
This is achieved when the overall price level of the goods and services available in the economy is relatively constant. This also refers to the prices of all products taken together- not to changes in the price of an individual product.
Social Efficiency (equi-marginal formulation)
This is achieved where the marginal social benefit ratio is equal to the marginal social cost ratio for any two alternatives.
import
a product or resource that is brought into one country from another
export
a product or resource that is sent to another country to be sold
scarcity
a small and inadequate amount.
quota
a specific amount or number of a particular product that can be imported or acquired in a given period of time
stigma
a stain on one's reputation
command economy
This type of economy relies on government officials to answer the three basic economic questions.
How does a government make money?
Through taxes.
U.S. Economy
U.S. Has a market system but it is not 100% market. U.S. Has a little command and traditional economy. This is known as mixed econony
Deflationary fiscal policy
Used to reduce a IG - here the taxation will be greater than government revenue.
Expansionary fiscal policy
Used to reduce a short run dg.Government revenue will be greater than taxation
Which of the following would be least likely to affect the supply of automobiles?
a successful physical fitness plan encouraging Americans to walk rather than to drive to their destinations
human capital
people who perform labor
UNDERUTILIZATION
Using fewer resources than an economy is capable of using.
economy
a system of production and distribution of resources, goods, and services
demand schedule
a table that lists the various quantities of a product or service that someone is willing to buy over a range of possible prices
demand schedule
a table that shows how much of a good or service all consumers are willing and able to buy at each price in a market
Define Opportunity Cost
What you sacrifice to do something instead of something else... "The next best thing" Ex. You could be studying or working and making $10 in that hour of studying so the opportunity cost of studying is $10
Comparative Advantage
When a person has lesser opportunity cost in creating something than someone else
Economic Choice
When a person has to decide to buy one thing instead of another like a toaster over a TV
Increasing Opportunity Costs of Production
When additional production of one good involves ever increasing sacrifices of another.
Define Economic Growth
When an economy's production possibilities increase Ex. More resources, Better resources, or improvements in technology
Risk
When an outcome may or may not occur but its probability of occurring is known.
Substitution Effect
When consumers react to an increase in a good's price by consuming less of that good and more of other goods. Substitute pizza for tacos, salads, or other lunch choices
Define Specialization
When firms focus their resources on production of good for which they have a comparative advantage
The Principle-agent Problem
Where people (principals), as a result of a lack of knowledge, cannot ensure that their best interests are served by their agents.
Black Markets
Where people ignore the government's price and/or quantity controls and sell illegally at whatever price equates illegal demand and supply.
Speculation
Where people make buying or selling decisions based on their anticipations of future prices.
Subsistence Production
Where people produce things for their own consumption.
Elastic Demand
Where quantity demanded changes by a larger percentage than price. Ignoring the negative sign, it will have a value greater than 1.
Inelastic Demand
Where quantity demanded changes by a smaller percentage than price. Ignoring the negative sign, it will have a value less than 1.
Unit Elasticity of Demand
Where quantity demanded changes by the same percentage as price. Ignoring the negative sign, it will have a value equal to 1.
Destabilising Speculation
Where the actions of speculators tend to make price movements larger.
Stabilising Speculation
Where the actions of speculators tend to reduce price fluctuations.
Rationing
Where the government restricts the amount of a good that people are allowed to buy.
deflation
a contraction of economic activity resulting in a decline of prices
incentive
a cost or benefit that motivates a decision made by a person
Sellers who were originally willing to supply 800 units of a good at $4 per unit are now willing to supply 600 units at $4 per unit. That change would be described as:
a decrease in supply
Which of the following will not increase the demand for iced tea?
a decrease in the price of iced tea
durable good
a good that lasts three years or more with regular use
Ludwig Erhard
belong to a group of free market economists called ordoliberals. had a vision of the german social market economy.
private property
belongings owned by a person or group and kept for their use only.
Sole proprietorship
business owned and operated by one person
entrepeneur
business people who organize productive resources.
Partnership
business that two or more individuals own and operate
free enterprise
businesses can compete for profit with little government interference
purchase
buy something
In a market economy, the amount of a good that is produced is primarily decided by the interaction of:
buyers and sellers
Law of Demand
buyers purchase more at lower prices than higher prices
scarcity
occurs whenever we do not have enough resources to produce all of the things we would like to have
domestic
of or relating to ones home country
collective bargaining
officials from the union and the company meet to discuss the terms of the workers new contract
It would greatly reduce our trade deficit most if we could curb our import of _____.
oil
Of the following, our imports of _____ contribute most to our trade deficit.
oil
An industry with seven firms is an _____.
oligopoly
If we know someone pays all their taxes and gives money to charity, we know that
only that they pay their taxes and give money to charity
limited liability
only the corporation not its owners, is responsible for the debts of the corporation
The main reason why we are the world's largest debtor nation is _____.
our trade deficit
National Income Accounting tracks
output, spending and income
Our trade deficit with China in 2009 was _____.
over $200 billion
unlimited liability
owner financially responsible for any and all problems of business
Proprietor
owner of a business
stock
ownership shares of a stock
The rule of reason today is _____.
partially in force
Joint venture
partnership set up for a specific purpose just for a short period of time
net pay
pay minus deductions and taxes
double taxation
paying twice on corporate profits
goods
people my buy like an car,book,computer,dogs,cats,and more
If someone regularly acts unethically in a market:
-They will probably hurt consumers -They will probably hurt suppliers -They will probably hurt the market itself
How do prices act as a "language" in the free market?
...
Progressive Tax
...
What role does the government play in determining some prices?
...
2 reasons as to why societies embraced extreme forms of socialism
1. bring a backward nation into the modern world. 2. eliminate the inefficiencies and wasteful excesses of capitalism.
The richest quintile of humanity spends about _____ times as much on consumption the world's poorest quintile.
66
Deflation
A fall in the general level of all prices. The opposite of inflation
Devaluation
A fall in the value of a country's currency under a fixed exchange rate. Exports cheaper.
profit
A financial gain
Inflation
A general increase in prices
Asymmetric Information
A situation where one party to a market transaction has much more information about a product or service than the other. The result may be an under- or over-allocation of resources.
After a Recession
After a recession, usually the economy undergoes recovery. Governments spend big sums of money to try and revitalise the economy thus giving confidence to other investors. Usually, austerity measures are taken during an economic crunch and are the problem is slowly eased while the spending habits of people within the economy improve.
AD-AS Model
Aggregate Demand-Aggregate Supply Model, this is the macroeconomic model that uses aggregate demand and aggregate supply to determine and explain the price level and the real domestic output.
Monetary Policy
An attempt to achieve broad economic goals by the regulation of the supply of money.
Change in demand
An increase or decrease in the quantity demanded over a range of prices. Shown by a shift of the demand curve
Expansion
An upturn in the business cycle during which real GDP rises; also called a recovery.
Service
Any action that one person or group does for another in exchange for payment.
services
Any activity that people want or need and pays money to those who provide it. (e.g. hair cutting, lawn mowing)
Markets
Any coming together of buyers and sellers of produced goods and services or the services of productive factors
Good
Any item to be bought or sold.
Break-even Output
Any output at which a (competitive) firm's total cost and total revenue are equal; an output at which a firm has neither an economic profit nor a loss, at which it earns only a normal profit.
Financial Year
Any period of twelve months beginning on the first day of January in any year or such other date as may be prescribed.
Potential output
Any point on the ppc represents this. A combination of goods and services that could be produced.
Define the resource Land/Natural Resources
Any resource created by nature Ex. Oil, Water, Mineral Deposits
Asset
Anything of monetary value owned by a firm or individual.
Barrier to Entry
Anything that artificially prevents the entry of firms into an industry.
A balanced budget
Arises when the government plans to spend the same amount of money as it raises.
Define the resource Labor
Effort or Talent that can be physical or mental. Ex. Education and Training
Soft commodities
Commodities that can be grown
Logo
Company's picture that represents them
Normal Good
For a(n) _________, a consumer's demand will increase as his or her income increases.
Cost push inflation
Occurs when the rise in the average price level of an economy is due to an increase in a firm's cost of production.
Tariffs or Import Levies
Taxes on imported products: i.e. customs duties.
Incidence of Tax
The distribution of the burden of tax between sellers and buyers.
Public Officer
The holder of any public office and includes any person appointed to act in any such office.
production process
The process of production
consumer price index
an index of the cost of all goods and services to a typical consumer
Gold Standard
ended by President Nixon on August 15, 1971
supply side policy
government policies designed to shift the long run aggregate supply curve to the right, thus increasing potential output in the economy; the use of tax incentives, (de)regulation, and other mechanisms to increase the ability and willingness to produce goods and services
consumer
is a person who satisfies a want or need by buying a good or service
demand
it's what people are willing to buy your stuff out of your store
The two biggest benefit programs aimed solely at the poor are _____ and _____.
public assistance, food stamps
transparency
revealing information on company
economic growth
steady growth in the productive capacity of the economy (and so a growth of national income)
surplus & shortage shown on the curve
study the curves
money supply
supply of money
The amount of rent paid for a piece of land is based on the _____ and the _____.
supply, demand
The wage rate is always determined by two factors: _____ and _____.
supply, demand
currency
the type of money a country uses
Demand is said to be ___ when the quantity demanded changes the same proportion as the price
unit elastic
When two firms in the same industry form one larger company, this is a _____ merger.
vertical
Horizontal merger
when two corporations that merge are in the same business
Variable expenses
Expenses that can be controlled & can CHANGE from month to month (your phone bill)
Dependancy Theory
A model that stresses under-development is caused by externally rather than internally. e.g. Poor advice from MEDC's, Fall in Commodity prices, and Colonial rule.
Tariff
A per unit tax on an import.
Slogan
Company's theme message
Benefit-cost Analysis
Comparing the marginal benefits of a government project or program with the marginal costs to decide whether or not to employ resources in that project or program and to what extent.
The average rate of tax of individuals or groups will be constant
Is one where as the variable on which the tax is based rises, people pay the same proportion of that variable in taxes. Many countries have looked at changing some of their direct, progressive taxes to proportional taxes.
Net exports
Is the difference between the revenue a country gains from its exports and the country's expenditure that it loses from buying other country's imports
Net property Income from Abroad
Is the difference in monetary values in the monies earned from assets abroad to the income paid to foreign assets operating domestically
The full employment level of national Income YF
Is the level of potential output that could be produced by an economy operating at its full capacity.
Factors of Production
Is the natural, human, and capital resources that are uses to produce goods and services
The balance of trading services (invisible trade)
Shows the difference between the value of a country's export of services and the value of a country's import of services
Real estate property tax
Tax paid by people who own homes, business properties, condos, or other real estate. May be charged on boats or cars
Producer Surplus
The difference between the going price and the marginal cost of producing an item
Factor Payments
The income people receive from supplying the factors of production.
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
Complex Multiplier
The multiplier which exists when changes in the gross domestic product change net taxes and imports, as well as saving.
Expenditure Approach
The national income accounting method that measures GDP by adding all the spend- ing for final goods during a period of time.
Interest rate
The percentage rate which must be paid for the use of investable funds
Change in Quantity Demanded
The term used for a movement along the demand curve to a new point. It occurs when there is a change in price.
Change in the Quantity Supplied
The term used for a movement along the supply curve to a new point. It occurs when there is a change in price.
Aggregate Expenditures
The total amount spent for final goods and services in an economy.
Corruption
The use of power for personal gain.
Depreciation
The using up or wearing out of capital goods
Real GDP
The value of all final goods produced during a given time period based on the prices existing in a selected base year.
Base Year
The year with which other years are compared when an index is constructed; for example, the base year for a price index.
price x quantity sold =
Total Revenue
Which of the following are NOT very important to maintaining effective market ethics?
Whether people understand the reasons for the rules and regulations
price floor
a legal minimum on the price at which a good can be sold
Complementary good
a product often used with another product
The supply of land _____.
is fixed
Today international finance is based on _____.
mainly a relatively free-floating exchange rate system
aggregate demand
sum of all personal consumption expenditures, business expenditures, and government expenditures in a particular time period; total quantity of goods and services all citizens, businesses, government will want at any one time
Peak
the height of an economic expansion, when real GDP stops rising
A monopsony is _____.
the only buyer of a product for which there are no close substitutes.
accelerator effect
the tendency for investment to increase when aggregate output increases and decrease when aggregate output decreases, accelerating the growth or decline of output
aggregate supply
the total amount of goods and services in the economy available at all possible price levels
opportunity cost
the value of the thing given up in a trade-off (the next best alternative)
prepare
to make ready
substitutes
two goods for which an increase in the price of one leads to an increase in the demand for the other
complements
two goods that are bought and used together & can affect each other's demand
Substitutes
two goods that can be used for the same purpose
Demand
what the consumers want, and demand
When demand is elastic:
(All of the above are correct) -price elasticity of demand is greater than one -consumers are relatively responsive to changes in price -the percentage change in quantity demanded resulting from a price change is greater than the percentage change in price
Which of the following is not likely to be an inferior good for most Americans?
(All of the above are likely to be inferior goods for most americans) -Thrift store clothing -Wine in a box -Intercity bus travel -Store brand canned vegetables
A monopoly would have a concentration ratio of _____ and a Herfindal-Hirschman index _____.
100, 10,000
Bank Reserves
A bank that accepts the deposits of and makes loans to depository institutions; in the United States, a Federal Reserve Bank.
Corporation
A legal entity formed to conduct business and possessing certain privileges not available to single proprietorships or partnerships, notably limited liability which confines the shareholder's possible losses to the amount paid to purchase shares in the business
Price ceiling
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
price floor
A legal minimum on the price at which a good or service can be sold
Acreage Allotments
A pre-1996 government program that determined the total number of acres to be used in producing (reduced amounts of) various food and fiber products and allocated these acres among individual farmers. These farmers had to limit their plantings to the allotted number of acres to obtain price supports for their crops.
Maximum Price
A price ceiling set by the government or some other agency. The price is not allowed to rise above this level (although it is allowed to fall below it).
Minimum Price
A price floor set by the government or some other agency. The price is not allowed to fall below this level (although it is allowed to rise above it).
Balance Sheet
A statement of the assets, liabilities, and net worth of a firm or individual at some given time.
Regression Analysis
A statistical technique which allows a functional relationship between two or more variables to be estimated.
Stocks and Flows
A stock is a quantity of something at a given point in time. A flow is an increase or decrease in something over a specified period of time.
Natural Resource
A supply of something that is found naturally on earth.
Graph
A visual representation of a relationship between two variables, usually drawn to some specified scale
Socialism
An economic and governmental system based on public ownership of the means of production and exchange.
Capitalism
An economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state.
savings
An economy of or reduction in money, time, or another resource. the money someone has kept, saved.
Dual economy
An economy that has a developing agriculture sector as well as a strong economy in the city.
ATR
Average Tax Rate is the total tax paid divided by total (taxable) income, as a percentage.
ATC
Average Total Cost is a firm's total cost divided by output (the quantity of product produced); equal to average fixed cost plus average variable cost.
The balance of trading goods (visible trade)
Shows the difference between the value of a country's export of goods and the value of a country's import of goods.
Define Marginal Cost
The additional cost from an additional unit of a good or service
Marginal Costs
The additional cost of doing a little bit more (or 1 unit more if a unit can be measured) of an activity.
Budget Deficit
The amount by which the expenditures of the Federal government exceed its revenues in any year.
Quantity Demanded
The amount of a good that a consumer is willing and able to buy at a given price over a given period of time.
Labor
The economically productive capabilities of humans, their physical and mental talents as applied to the production of goods and services
Income Effect
The effect of a change in price on quantity demanded arising from the consumer becoming better or worse off as a result of the price change.
Adaptive Expectations Theory
The idea that people determine their expectations about future events (for example, inflation) on the basis of past and present events (rates of inflation) and only change their expectations as events unfold.
Ability-to-pay Principle
The idea that those who have greater income (or wealth) should pay a greater proportion of it as taxes than those who have less income (or wealth).
income
The money paid to households by business firms and the government in exchange for the households' resources is called this.
Currency
The money people use to make trade easier
labor force participation rate
The percentage of people, 16 years of age or older who could work, who are either working or looking for work.
Infrastructure
The physic capital used for transportation and communication.
Gross Domestic Product (GDP)
The value of all the goods and services produced in an economy during some accounting period, usually a year
Price ceiling
a legal maximum price that may be charged for a particular good or service
Price floor
a legal minimum price below which a good or service may not be sold
trade barrier
anything that slows down or prevents one country from exchanging goods with another
To obtain the greatest gains from trade, a country should specialize in and _____ those goods for which it has a comparative advantage and ______ those goods for which other countries have a comparative advantage
export; import
Inventory
extra supply of the items used in a business, such as raw materials or goods for sale
current account deficit
is when import expenditure is greater than export revenue
Competition
someone making the same good as you for lower price
capital
the goods such as tools, machinery and buildings used to make products
frequency
the intervals between occurrences
A quantity of a good bought and sold in a market will be below the equilibrium quantity if:
the market price is either above or below the equilibrium price
GDP
the market value of all final goods and services produced withing a given time period
technology
the methods or processes used to make goods and servics
interest
the payment people receive when they lend money or allow someone else to use their money
producer
the people or businesses that provide goods and services
inflation rate
the percentage change in the price index from the preceding period
utility
the pleasure, usefulness, or satisfaction we get from using the product
macroequilibrium
the point where aggregate supply and aggregate demand meet
economics
the study of how society manages its scarce resources
macroeconomics
the study of how the economy as a whole works
economics
the study of how we make decisions in a world where resources are limited
A secondary effect of an action that may occur after the initial effects is known as a(n):
unintended consequence
inelastic
when a change in price leads to a relatively smaller change in quantity demanded
indebetedness
when the Govand private sector of a country owe money to overseas banks and/or givernments and/or multilateral institutions.
unit elastic
when the percentage change in price and quantity demanded are the same
law of demand
when the price of a good or service falls, consumers buy more of it
complements
when the use of one product increases the use of another product
undermeployment
when workers are employed in part-time jobs and in jobs of which they are over-skilled.qualified
market supply
when you combine the supply schedules of all the businesses that provide the same good or service
speculation (ER)
where foreign currency traders make a decision to buy or sell a currency based on their expectations of future exchange rate moevements
total revenue test
you can measure elasticity by comparing the total revenue a business would receive when offering its product at various prices.
Which of the following statements is most consistent with the rule of rational choice?
"When evaluating new prescription drugs, the Food and Drug administration should weigh each drug's potential health benefits against the potential health risks posed by known side effects."
which of the following would reflect self-interested behavior?
(All of the above) -a worker pursuing a higher paying job and better working conditions -a consumer seeking a higher level of satisfaction with her current income -donating a cell phone to a woman's shelter -Mother Teresa using her Nobel Prize money to care for the poor
- equilibrium wage rate - real wages - money wages
- The percentage of people, 16 years of age or older who could work, who are either working or looking for work - How much can actually be bought with the wages paid (as opposed to money wages) - The number of dollars workers receive for their labor (as opposed to real wages)
Effective free market ethical systems must provide for all of the following:
-Clearly defined rules and regulations -Meaningful punishments for rule breakers -Adequate market oversight and policing -Enough freedom for creativity and competition EXCEPT: a clearly defined moral foundation
More efficient positive market ethics will generally help improve all of the following challenges:
-Positive externalities of a market -Negative externalities of a market -Consumer surplus of a market -Producer surplus of a market
GATT
1947, in Havana Cuba, 23 countries signed this trade agreement
Embargo
A Government orders stopping trade with another country
Banders' Bank
A bank that accepts the deposits of and makes loans to depository institutions; in the United States, a Federal Reserve Bank
Command System
A bank that provides checking accounts and savings accounts, and makes loans for a variety of purposes .
Mercantilism
A body of policy recommendations designed to promote the development of the early nation states of western Europe in the 17th and 18th centuries. The emphasis was on utilizing trade to increase national wealth at the expense of the countries being traded with through fostering a "favourable balance of trade", by which was meant an excess of exports over imports
Annually Balanced Budget
A budget in which government expenditures and tax collections are equal each year.
Devaluation
A decrease in the governmentally defined value of a currency.
Equity
A distribution of income that is considered to be fair or just. Note: an equitable distribution is not the same as an equal distribution and that different people have different views on what is equitable.
Laissez-faire
A doctrine advocating a minimum role for government in the economy, such as providing for defence against external enemies, a system of law to protect individuals and their property, and production of such goods and services which for some reason are needed, but would not be produced by private firms
Recession
A downturn in the business cycle during which real GDP declines, and the unemployment rate rises. Also called a contraction. during a recession, the economy is functioning inside and farther away from its production possibilities curve. A recession is when your neighbor loses his or her job, and a depression is when you also lose your job!
Bond
A financial device through which a borrower (a firm or government) is obligated to pay the principal and interest on a loan at a specific date in the future.
Single proprietorship
A form of unincorporated business in which there is only one owner
Economic Model
A formal presentation of an economic theory.
Substitute Goods
A pair of goods which are considered by consumers to be alternatives to each other. As the price of one goes up, the demand for the other rises. E.g Iceberg & Romaine Lettuce.
Recession
A period where national output falls for six months or more.
Price Taker
A person or firm with no power to be able to influence the market price.
Entrepreneur
A person who runs a buisness taking on financial risk
Discouraged Worker
A person who wants to work, but who has given up searching for work because he or she believes there will be no job offers.
Adverse Selection Problem
A problem arising when information known to one party to a contract or agreement is not known to the other party, causing the latter to incur major costs. Example: Individuals who have the poorest health are most likely to buy health insurance.
Tariff
A tax on imported goods
Tariffs
A tax on imported goods
Indirect Tax
A tax on the expenditure on goods. Indirect taxes include value added tax (VAT) and duties on tobacco, alcoholic drinks and petrol. These taxes are not paid directly by the consumer, but indirectly via the sellers of the good. Indirect taxes contrast with direct taxes (such as income tax) which are paid directly out of people's incomes.
Regressive tax
A tax that takes a higher percentage of low incomes than high ones
Which of the following is correct?
A theory may result from a tested and confirmed hypothesis
Command Economy
An economy in which production, investment, prices, and incomes are determined by the government
Free-market Economy
An economy where all economic decisions are taken by individual households and firms and with no government intervention.
Mixed Economy
An economy where economic decisions are made partly by the government and partly through the market.
multiplier effect
An effect in which an increase in spending produces an increase in national income and consumption greater than the initial amount spent.
Parliamentary Election
An election of a member or members to serve in the House of Representatives.
FIXED COSTS
An expense that costs the same whether or not a firm is producing a good or service Production facility, the cost of the building and equipping a factory, office, store, or restaurant --> rent, machinery repairs, property taxes, and salaries
Inflation
An increase in the general (average) price level of goods and services in the economy.
Business cycle
Fluctuations in economic activity, such as employment and production
Specialization
Focusing on one good or service (producing one thing and are really good at it)
Inflation
Is the persistent rise in the average price level either in or of an economy during a given period. = (new CPI-old CPI) x 100 (Old CPI).
Production
Is the process of changing the raw materials of the resource into a good or service.
MPC marginal propensity to consume
Is the proportion of an extra pound of income that households are prepared to spend on goods and services.
MPS - marginal propensity to save
Is the proportion of an extra pound of income that households do not consume.
National rate of unemployment
Is the unemployment rate that would exist at an economy's full employment level of national income.
Exchange rate
Is the value of one currency expressed in terms of another currency
Credit
Money entering country (+)
Debit
Money leaving a country (-)
Remittances
Money sent back by individuals to families within their own country
profit
Money that is left after expenses have been paid for from a business or an investment.
Market Equilibrium
Occurs when the quantity demanded equals the quantity supplied.
What happens to a market in equilibrium when there is an increase in demand?
Quantity demanded will exceed quantity supplied, so the price will rise. (shortage)
Errors & omissions (net unilateral transfers from abroad)
Shows the difference between domestic households transfer of private gifts and remittances and the domestic Governments' transfer of aid, contributions to a trading block, grants etc to abroad and foreign households transfers of private gifts and remittance and foreign Governments' transfers of aid etc to the UK
SUPPLY SCHEDULE
Shows the relationship between price and the quantity supplied for a specific good.
Marginal Benfits
The additional benefits of doing a little bit more (or 1 unit more if a unit can be measured) of an activity.
Consumer Surplus
The difference between the going price and the price the consumer expects to pay
Transactions in non-produced, non-financial assets
The difference between transfers of non-produced assets and intangible assets between a domestic economy and foreign citizens
Collective bargaining
The discussion between company managers and union leaders who speak for the company's employmees.
Size distribution of income
The distribution of income among groups of income recipients defined on the basis of the size of their incomes
Corporate Profits
The dollars that exceed the costs of the corporation
Substitution Effect
The effect of a change in price on quantity demanded arising from the consumer switching to or from alternative (substitute) products.
Define the resource Entrepreneurship
The effort and know-how to put the other resources together in a productive venture
LABOR
The effort that a person devoted to a task for which that person is paid.
Labor
The effort that people devote to a task for which they are paid.
Cyclically Balanced Budget
The equality of government expenditures and net tax collections over the course of a business cycle; deficits incurred during periods of recession are offset by surpluses obtained during periods of prosperity (inflation).
Scarcity
The excess of human wants over what can actually be produced to fulfil these wants. Q: The inability to satisfy all our wants.
Free Trade
The exchange of goods, services and capital between one country and another country without any barriers to trade/forms of protection
Barter
The exchange of one good or service for another good or service.
Brain Drains
The exit or emigration of highly educated, highly skilled workers from a country.
Capital Outflow
The expenditures made by the residents of a nation to purchase real and financial capital from the residents of foreign nations.
Benefits-received Principle
The idea that those who receive the benefits of goods and services provided by government should pay the taxes required to finance them.
Disposable income
The income a person or household has left to dispose of after income tax has been deducted from personal income. Disposable income may either be spent on consumption or saved
factors of production
The ingredients that go into the production of goods and services
Factors of Production (or resources)
The inputs into the production of goods and services: labour, land and raw materials, and capital.
Market
The interaction between buyers and sellers.
Annual Percantage Rate
The interest rate for one year
Law of demand
The inverse relationship between price and quantity of a good or service demanded
Break-even Income
The level of disposable income at which households plan to consume (spend) all their income and to save none of it.
Budget Constraint
The limit that the size of a consumer's income (and the prices that must be paid for goods and services) imposes on the ability of that consumer to obtain goods and services.
Budget Restraint
The limit which the size of a consumer's income (and the prices which must be paid for goods and services) imposes on the ability of that consumer to obtain goods and services.
scarcity
The limited nature of society's resources
Brain drain
The loss of human capital as workers work in other countries.
Minimum payment
The lowest amount you must pay toward your credit balance each month
capital resources
The machines, tools and buildings used to produce goods and services
Classical Economics
The macroeconomic generalizations accepted by most economists before the 1930s which led to the conclusion that a capitalistic economy was self-regulating and therefore would usually employ its resources fully.
Gross domestic product (GDP)
The market value of all final goods and services produced in a nation during a period of time, usually a year.
Credit limit
The maximum amount of credit extended to you by a bank or credit card issuer
Point Elasticity
The measurement of elasticity at a point on a curve. The formula for price elasticity of demand using the point elasticity method is dQ/dP × P/Q, where dQ/dP is the inverse of the slope of the tangent to the demand curve at the point in question.
ECONOMIC SYSTEM
The method used by a society to produce and distribute goods and services.
Total domestic expenditure (at market prices)
The monetary value of all the domestic spending on goods and services regardless of where they been produced
NNP (Net National Product) at factor cost
The monetary value that shows how much an economy has available for spending on goods and services after accounting for GNP
EQUILIBRIUM
The point at which quantity demanded and quantity supplied are equal.
How can the global economy affect the supply of a good in the United States?
The suppliers of imported goods are affected by changes in other countries *Increase in wages of Indian works *New technology in Japan *A new oil discovery in Russia Total supply = sub of imports and domestically produced products
The Price Mechanism
The system in a market economy whereby changes in price in response to changes in demand and supply have the effect of making demand equal to supply.
Change in Demand
The term used for a shift in the demand curve. It occurs when a determinant of demand other than price changes.
Change in Supply
The term used for a shift in the supply curve. It occurs when a determinant other than price changes.
Prebish-Singer hypothesis
The theory that the terms of trade of developing countries will decline over time due to their dependency on primary sector exports.
Aggregate Supply
The total amount of output in the economy. 2nd Definition: A schedule or curve showing the total quantity of goods and services supplied (produced) at different price levels.
Total Revenue (TR) (per period of time)
The total amount received by firms from the sale of a product, before the deduction of taxes or any other costs. The price multiplied by the quantity sold. TR = P × Q.
National Income
The total income earned by resource owners, including wages, rents, interest, and profits. NI is calculated as gross domestic product minus depreciation of the capital worn out in producing output.
Personal Income
The total income received by households that is available for consumption, saving, and payment of personal taxes.
Aggregate Demand
The total level of spending in the economy. 2nd Definition: A schedule or curve that shows the total quantity of goods and services demanded (purchased) at different price levels.
Government spending
The total outlays by government on goods and services during some accounting period, usually a year. Government outlays such as welfare benefits to households, for example, are normally excluded from this amount on the grounds that they are merely transfers of income from taxpayers to the beneficiaries of such programs
Average Product
The total output produced per unit of a resource employed (total product divided by the quantity of that employed resource, i.e. total product divided by labour).
Fiscal Policy
a deliberate manipulation by a Government of its revenue and expenditure in order to achieve a macro economic objective.
Income Statement
a financial statement of a company's operation. Shows a company's income, expenses, and income for a period of time. Shows the come for a period of time. Shows the company's profit or loss for a given period of time.
normal good
a good for which, other things equal, an increase in income leads to an increase in demand
non-durable good
a good that wears out in fewer than three years, with regular use
charter
a government document granting permission to organize
price ceiling
a government imposed limit on the price that can be chargedd for goods/services that are essential, but too expensive for some consumers
Embargo
a government order preventing trade with another country
Fiscal Policy
a government policy for dealing with the budget
Fiscal Policy
a government policy for dealing with the budget (especially with taxation and borrowing)
fiscal policy
a government policy for dealing with the budget (especially with taxation and borrowing)
demand curve
a graph of the relationship between the price of a good and the quantity demanded
supply curve
a graph of the relationship between the price of a good and the quantity supplied
demand curve
a graph that shows how much of a good or service an individual will buy at each price
demand curve
a graph that shows the amount of a product that would be bought at all possible prices in the market
board of directors
a group of people who manage a company
The private ownership of property and the use of the market system to direct and coordinate economic activity are the most characteristic of:
a market economy
core inflation
a measure of inflation that factors out the changes in prices of products that tend to experience volatile price swings, e.g. food and energy prices. this give spolicy makers a better indication of long-term changes in the price level
Minimum wage
a minimum price that an employer can pay a worker for an hour of labor
Income
a monetary gain, usually from the sale of products or services (money earned)
economic system
a nation's way of producing things that its people want or need
supply schedule
a numerical chart that illustrates the law of supply
consumption tax
a plan in which people are taxed not on what they earn but on what they spend
budget
a plan that shows income ,spending and saving
budget
a plan that shows income, spending, and saving
demand schedule
a table that shows the relationship between the price of a good and the quantity demanded
supply schedule
a table that shows the relationship between the price of a good and the quantity supplied
forbearance
a temporary suspension or reduction of monthly loan payments, usually up to one year
mediation
a third party is brought in to settle the dispute
expansionary monetary policy
an increase in the money supply aimed at increasing aggregate output (income) (Y)
inflation
an increase in the overall level of prices in the economy
Which of the following is most likely a topic of discussion in a microeconomics course?
an increase in the price of lumber used to construct houses
discrimination
cannot treat employees differently on the basis of race, religion, color, gender or age
Under a(n) _____ shop, an employer may hire only union members.
closed
lockout
company blocks workers from entering its buildings until they agree to accept its contract terms
Marginal analysis involves:
comparing the additional benefit from an action to the additional cost
substitutes
competing products that consumers can use in place of another
Change in demand
consumers demand different amounts at every price, causing the demand curve to SHIFT to the left or the right
"Mandating longer sentences for any criminal's third arrest will lead to a reduction in crime. Less crime will reduce the number of police officers cities will hire." This quotation:
contains positive statements only
To the extent that a government price control succeeds in affecting price, it can be expected to lead to a corresponding:
decrease in the volume of sales whether the price is forced up or down
Price elasticity of demand
economic concept that deals with how much demand varies according to changes in price
Law of supply
economic rule stating that price and quantity supplied move in the same direction
Law of diminishing returns
economic rule that says as more units of a factor of production (such as labor) are added to other factors of production (such as equipment), after some point total output continues to increase but at a diminishing rate
traditional economy
economic system in which the decisions of what, how, and for whom to produce are based on custom or habit
The basis for monopoly in the automobile industry would most likely be _____.
economies of scale
Barriers to entering a monopoly are
economies of scale, control over essential resources, legal barriers to entry, economies are being established
Planification
efforts by gov to focus, prioritize and guide actions of private business
In the short run the monopolistic competitor wil be _____.
either taking a loss or making a profit
If an increase in price causes total expenditure on a product to decrease, then the price elasticity of demand is:
elastic
The problem of scarcity:
exists because resources are limited to relative to wants
variable cost
expenses that change with the number of products produced
fixed cost
expenses that do not change no matter how much a business produces
Antitrust legislation
federal and state laws passed to prevent new monopolies form forming and to break up those that already exist
search costs
financial and opportunity costs consumers pay when searching for a good or service
Imports
goods produced abroad and sold domestically
imports
goods produced abroad and sold domestically
exports
goods produced domestically and sold abroad
inferior goods
goods that consumers demand less of when their incomes rise
normal goods
goods that consumers demand more of when their incomes rise
laissez-faire economics
government should not interfere in economics
welfare
governmental provision of economic assistance to persons in need
govt monopoly
govt owns and runs the business. authorized. private producers dont want to enter for lack of potential profit
Demand Curve
graphic representation between quantity price and quantity demanded
labor unions
groups of workers who band together to have a better chance to obtain higher pay and better working conditions
A tariff is a tax on _____, and a quota is a limit on _____.
imports, imports
You lose $20 from your wallet and decide to miss an hour from work in order to search for it. To an economist, this means that:
in your estimation the expected value of searching for the lost $20 for an hour exceeds your hourly wage
A recent study at a liberal arts college concluded that demand elasticity is 0.91 for college courses. The administration is considering a tuition increase to help balance the budget. An economist might advise the school to:
increase tuition in order to increase revenue
A shortage exists in the market for corn at the prevailing price. The shortage can eliminated by a price:
increase, increasing the quantity supplied and decreasing the quantity demanded
entrepreneurs
individuals who start new businesses, introduce new products and improve new products, and improve management techniques
factor market
markets where productive resources are bought and sold
currency
money (countries all around the world have different currency types)
To be on the gold standard, a nation must maintain a fixed ratio between its gold stock and _____.
money supply
profit
money that all the cost have been paid off
income
money that you take in
Unlike its competitors, one glass producer can use its equipment to make either windows for houses or windows for cars. Other things equal, compared to its competitors, its supply curve of windows for cars would be:
more elastic than the supply curves of competitors
Relative to the Chinese economy, the U.S. economy is _____.
more labor intensive
If there were no inflation, a dollar today would be worth _____.
more than a dollar received in the future.
Change in quantity demanded
movement along the demand curve showing that a different quantity is purchased in response to a change in price
four factors of production
natural resources, capital resources, labor, and entrepreneurship
Geographic monopoly
no other producers within a certain region
Human resources
people that are in the work force, defined for specific jobs
rational people
people who systematically and purposefully do the best they can to achieve their objectives
labor
people with all their efforts used in production
earning
providing a paid service, completing a job, interest from saving
Some political leaders have proposed that parents be granted a substantially larger reduction in their annual personal income taxes for each child that they parent. The economic way of thinking indicates that legislation of this type of would:
reduce the after-tax cost of raising children and therefore increase the birth rate
ethical behavior
respecting the rights of producers and consumers
If we abolished the minimum wage law, employment of low-wage workers would _____.
rise
invest
save money in a way that increased its value for future donating or spending
Economic goods are:
scarce products that are created from scarce resources
Lorenz Curves
shows the relationship between the cumulative percentage of a country's total population and the cumulative percentage of total income earnt by that population.
economic model
simplified version of a complex concept or behavior expressed in the form of an equation, graph or illustration
Inelastic demand
situation in which a product's price change has little impact on the quantity demanded by consumers
shortage
situation in which quantity demanded is greater than quantity supplied; also known as excess demand
Surplus
situation in which quantity supplied is greater than quantity demanded at the current price
surplus
situation in which quantity supplied is greater that quantity demanded; also known as excess supply
economics
social science dealing with how people satisfy seemingly unlimited wants and needs, with scarce resources
A leftward shift in supply could be caused by:
some firms leaving the industry
incentive
something that induces a person to act
Whenever the price of Good A increases, the demand for Good B increases as well. Good A and B appear to be:
substitutes
leakage
subtractions from the circular flow that is not passed on immediately
supply shock
sudden shortage of a good
Today currency exchange rates are set mainly by _____.
supply and demand
Ceteris paribus, if an 8% increase in price leads to a 6% increase in the quantity supplied, then:
supply is inelastic
Today exchanges rates are set by _____ and _____.
supply, demand
Traditional Economy
system in which economic decisions are based on customs and beliefs that have been handed down from generation to generation
rationing
system of allocating scarce goods and services using criteria other than price
indirect taxation
tax imposed upon expenditure. It is placed upon the selling price of a product. Raises the firm's costs and shifts the supply curve for the product vertically upwards by the amount of the tax, less product will be supplied at every price.
direct taxation
taxes imposed on people's income or wealth, and on firms' profits. Unavoidable, because households and firms are obliged to declare their full income to governments and pay taxes on it accordingly.
Utility
the ability of any good or service to satisfy consumer wants
comparative advantage
the ability to produce a good at a lower opportunity cost than another producer
absolute advantage
the ability to produce a good using fewer inputs than another producer
The ultimate weapon that management can use against unions is _____.
the ability to take (or withstand a strike)
voluntary exchange
the act of buyers and sellers freely and willingly engaging in market transactions
marginal benefit
the additional or extra benefit associated with an action
trade-off
the alternative you face if you decide to do one thing rather than another
total revenue
the amount a firm receives for the sale of its output before production costs are paid
shortage
the amount by which the quantity demanded is higher than the quantity supplied
surplus
the amount by which the quantity supplied is higher than the quantity demanded
Quantity demanded
the amount of a good or service that a consumer is willing and able to purchase at a specific price
Quantity supplied
the amount of a good or service that a producer is will ing and able to supply at a specific price
Demand
the amount of a good or service that consumers are able and willing to buy at various possible prices during a specified time period
demand
the amount of a good or service that people (consumers) are willing and able to buy at various prices during a given time period
quantity demanded
the amount of a good that buyers are willing and able to purchase
supply
the amount of goods producers are willing to make and sell
savings
the amount of money you earn but do not spend
Labor force
the amount of people in that currently have the ability to work
supply
the amount of something
co-payment
the amount owed each time you visit the doctor
gross pay
the amount people earn per pay period before any deductions or taxes are paid
Owner's Equity
the amount pf the initial investment plus retained earnings (earnings reinvested in the business). The owners' right to the assets of a business.
ceteris paribus
the assumption of nothing else changing - only a change in price (results in a change in quantity demanded)
law of demand
the claim that, other things equal, the quantity demanded of a good falls when the price of the good rises
law of supply
the claim that, other things equal, the quantity supplied of a good rises when the price of the good rises
total cost
the combination of all fixed and variable costs
interest rates
the cost of borrowing money
opportunity cost
the cost of the next-best use of your money or time when you choose to do one thing rather than another
short run economics
the decision-making time frame of a firm in which at least one factor of production is fixed
productivity
the degree to which resources are being used efficiently to produce goods and services
demand
the desire to have some good or service and the ability to pay for it
Rationing
the distribution of goods and services based on something other than price
Iron Law of Wages
the doctrine or theory that wages tend toward a level sufficient only to maintain a subsistence standard of living.
gross domestic product
the dollar amount of all final goods and services produced within a country's borders in a year.
profit motive
the driving force that encourages individuals and organizations to improve their material well being
The largest government program aimed exclusively at helping the poor is _____.
the earned income tax credit
The fallacy of composition is:
the erroneous view that what is true for the individual will also be true for the group
marginalism
the evaluation of the usefulness of adding one more item in the production of a product or service
demand elasticity
the extent to which a change in price causes a change in the quantity demanded
Market structure
the extent to which competition prevails in particular markets
entrepreneurship
the factor of production that brings together the other three factors of production with the aim of making profit. Entrepreneurship tends to involve risk taking
capital goods
the factories. machines, and technology that people use to make products to sell
search costs
the financial and opportunity costs consumers pay when searching for a good or service
The opportunity cost of an action is equal to:
the highest valued opportunity that must be sacrificed in order to take the action
marginal cost
the increase in expenses caused by producing another unit of something
human capital
the knowledge and skills that make it possible for workers to earn a living producing foods of services
tax incidence
the manner in which the burden of a tax is shared among participants in a market
We can tell if a market has too many ethics rules because:
the marginal cost of the ethics rule is higher than the marginal benefit
rationing
the method of distribution of a good when there is a shortage usually by the Government to ensure access t all.
profit
the money a business receives for its products or services over and above its costs
interest
the money earned on money saved.
financial capital
the money needed to run the business
opportunity cost
the next best alternative use of money, time, or resources, when a choice is made rather than another (trade-off)
purchasing power
the number of goods/services that can be purchased with a unit of currency.
social responsibility
the obligation they have to pursue goals that benefit society as well as themselves
articles of parntership
the partners draw up a contract or a legal agreement
Equilibrium price
the price at which the amount producers are willing to supply is equal to the amount consumers are willing to buy
equilibrium price
the price at which the amount producers are willing to supply is equal to the amount consumers are willing to buy
equilibrium quantity
the quantity supplied and the quantity demanded at the equilibrium price.
Human capital is:
the skill or knowledge of individuals
minimum wage
the smallest amount that can legally be paid to workers for an hour of work
competition
the struggle that goes on between buyers and sellers to get the best products at the lowest prices
macroeconomics
the study of economy-wide phenomena, including inflation, unemployment, and economic growth
microeconomics
the study of how households and firms make decisions and how they interact in markets
economics
the study of how people choose to use their limited resources to satisfy their unlimited wants
microeconomics
the study of the behavior and decision making by small units such as individuals and businesses
microeconomics
the study of the effects of economic forces on individual parts of the economy, such as business firms, households, and workers
human capital
the sum of people's skills, abilities, health, education, and motivation
human capital
the sum of the skills, abilities, and motivation of people
progressive tax
those who earn higher incomes pay a higher, than those with lower incomes.
long run economics
time frame assumes no fixed factors of production; firms can enter or leave the marketplace, and the cost (and availability) of land, labor, raw materials, and capital goods can be assumed to vary
elasticity of demand
to describe how responsive consumers are to price changes in the marketplace
export
to send goods to another country to sell (e.g. trees from WA sent to Japan)
a DECREASE in demand (outside of ceteris paribus) will shift to the ____
to the left, to the left...
physical capital
tools, equipment, and factories used for production
capital good
tools, equipment, or other manufactured good, used to produce other goods and services (a factor of production)
aggregate demand
total amount of good and services that everyone and govt will buy at every price level
A 25% decrease in the price of breakfast cereal leads to 20% increase in the quantity of cereal demanded. As a result:
total revenue will decrease
gross national product
total value of goods and services, including income received from abroad, produced by the residents of a country within a specific time period, usually one year.
small scale privatization
transfer of small shops (usually to current managers)
Supply curve
upward-sloping line that shows in graph form the quantities supplied at each possible price
contractionary fiscal policy
used to decrease aggregate demand or supply. Deliberate measures to decrease government expenditures, increase taxes, or both. Appropriate during periods of inflation.
expansionary fiscal policy
used to increase aggregate demand or supply. Deliberate measures to increase government expenditures, decrease taxes, or both Appropriate during periods of unemployment.
gosbank
was the central bank and only bank whatsoever
cost benefit analysis
way of thinking about a choice that compares the cost of an action to its benefits
private property rights
we have the freedom to own and use, or dispose of, our own property as we choose as long as we do not interfere with the rights of others
economic interdepence
we rely on others and others rely on us to provide the goods and services that we consume
You would most likely be a union member if you _____.
were a teacher
opportunity cost
whatever must be given up to obtain some item
elastic
when a change in price, either up or down, leads to a relatively larger change in quantity demanded
substitution effect
when consumers react to an increase in a good's price by consuming less of that good, and more of other goods
embargo
when one country announces it will no longer trade with another country in order to isolate the country and cause problems with that country's economy
excess supply
when quantity supplied is more than quantity demanded
unemployment
where people who are willing and able to work of working age are without wokr and are actively seeking employment
Product differentiation can take place _____.
whether or not there are physical difference among the products
