Economics Final Exam Review_2019
CHANGE IN QUANTITY DEMANDED
MOVEMENT ALONG THE DEMAND CURVE showing that the amount someone is willing to purchase changes when the price changes. Due to change in price.
nonprofit organization
Institution that functions much like a business, but does not operate for the purpose of generating profits
factors of production
land, labor, and capital; the three groups of resources that are used to make all goods and services
multinational corporation (MNC)
large corporation that produces and sells its goods and services throughout the world
collective
large farm leased from the state to groups of peasant farmers
zoning law
law in a city or town that designates separate areas for residency and for business
law of increasing costs
law that states that as we shift factors of production from making one good or service to another, the cost of producing the second item increases
public disclosure laws
laws requiring companies to provide full information about their products
antitrust laws
laws that encourage competition in the marketplace
economic rights
legal equality, private property, free contract, voluntary exchange, competition
differentiation
making a product different from other similar products
factor market
market in which firms purchase the factors of production from households
fringe benefits
payments to employees other than wages or salary
self interest
personal gain; the motivating force in a free market economy
goods
physical objects such as clothes or shoes
economic security
protection from adverse economic events
profit motive
the desire to make a profit
competition
the struggle among producers for the dollars of consumers
economics
the study of how people seek to satisfy their needs and wants by making choices
Utility
the usefulness or satisfaction one gets from consumption
cost
to an economist, the alternative that is given up because of a decision
Complements
two goods that are bought and used together
inferior goods
Goods for which demand tends to fall when income rises.
sole proprietorship
a business owned and managed by a single individual
supply schedule
a chart that lists how much of a good a supplier will offer at different prices
business cycle
a cycle or series of cycles of economic expansion and contraction.
bond
a formal contract to repay borrowed money with interest at fixed intervals
cartel
a formal organization of producers that agree to coordinate prices and production
unemployment insurance
a government program that partially protects workers' incomes when they become unemployed
TANF
a government program that provides cash assistance for low-income families
supply curve
a graph of the quantity supplied of a good at different prices
production possibilities curve
a graph that shows alternative ways to use an economy's resources
demand curve
a graphic representation of a demand schedule
interest group
a group of people with common goals who organize to influence government
corporation
a legal entity owned by individual stockholders
patent
a license that gives the inventor of a new product the exclusive right to sell it for a certain period of time
perfect competition
a market structure in which a large number of firms all produce the same product
monopolistic competition
a market structure in which many companies sell products that are similar but not identical
imperfect competition
a market structure that does not meet the conditions of perfect competition
natural monopoly
a market that runs most efficiently when one large firm supplies all of the output
price ceiling
a maximum price that can be legally charged for a good or service
free-rider
a person who receives the benefit of a good but avoids paying for it
guns or butter
a phrase that refers to the trade-offs that nations face when choosing whether to produce more or less military or consumer goods
commodity
a product that is the same no matter who produces it, such as petroleum, notebook paper, or milk
business franchise
a semi-independent business that pays fees to a parent company in return for the exclusive right to sell a certain product or service in a given area
price war
a series of competitive price cuts that lowers the market price below the cost of production
shortage
a situation in which a good or service is unavailable
market failure
a situation in which a market left on its own fails to allocate resources efficiently
horizontal merger
the combination of two or more firms competing in the same market with the same good or service
vertical merger
the combination of two or more firms involved in different stages of producing the same good or service
open opportunity
the concept that everyone can compete in the marketplace
public interest
the concerns of the public as a whole
elasticity of demand
a measure of how consumers respond to price changes
minimum wage
a minimum price that an employer can pay a worker for an hour of labor
government monopoly
a monopoly created by the government
articles of partnership
a partnership agreement
rent control
a price ceiling placed on rent
transition economy
an economy once centrally planned that is changing to a market economy
business organization
an establishment formed to carry on commercial enterprise
poverty threshold
an income level below that which is needed to support families or households
social security
federal program of disability and retirement benefits that covers most working people
negative externality
harmful side effect that affects an uninvolved third party
assets
money and other valuables belonging to an individual or business
land
natural resources that are used to make goods and services
business association
nonprofit organization that promotes collective business interests for a city, state, or other geographical area, or for a group of similar businesses
trade association
nonprofit organization that promotes the interests of a particular industry
professional organization
nonprofit organization that works to improve the image, working conditions, and skill levels of people in particular occupations
demand
the desire to own something and the ability to pay for it
laissez faire
the doctrine that government should not interfere in business
labor
the effort that people devote to a task for which they are paid
start-up costs
the expenses a firm must pay before it can begin to produce and sell goods
socialism
the factors of production are owned by the public and operate for the welfare of all
economic equity
the fairness with which an economy distributes its resources and wealth
liability
the legally bound obligation to pay debts
surplus
A situation in which quantity supplied is greater than quantity demanded
price floor
a minimum price for a good or service
cash transfer
direct payments of money to eligible poor people
normal goods
(superior goods) a good that consumers demand more of when their incomes increase
stock
A certificate of ownership in a corporation
merger
Combination of two or more companies into a single firm
supply
The amount of goods available
franchise
The right to sell a good or service within an exclusive market
Economic question answered by basic social values and goals
Who consumes
Ceteris Paribus
a Latin phrase that means "all other things held constant"
cooperative
a business organization owned and operated by a group of individuals for their mutual benefit
partnership
a business organization owned by two or more persons who agree on a specific division of responsibilities and profits
demand schedule
a table that lists the quantity of a good a person will buy at each different price
excise tax
a tax on the production or sale of a good
nonprice competition
a way to attract customers through style, service, or location, but not a lower price
Uniform Partnership Act (UPA)
act ordering common ownership interests, profit and loss sharing, and shared management responsibilities in a partnership
positive externality
beneficial side effect that affects an uninvolved third party
conglomerate
business combination merging more than three businesses that make unrelated products
Law of Demand
consumers buy more of a good when its price decreases and less when its price increases
service cooperative
cooperative that provides a service, rather than a good
closely held corporation
corporation that issues stock to only a few people, often family members
publicly held corporation
corporation that sells stock on the open market
thinking at the margin
deciding whether to do or use one additional unit of some resource
elastic demand
demand in which changes in price have large effects on the amount demanded
inelastic demand
demand in which changes in price have little or no effect on the amount demanded
disequilibrium
describes any price or quantity not at equilibrium; when quantity supplied is not equal to quantity demanded in a market
price discrimination
division of customers into groups based on how much they will pay for a good
free enterprise
economic system that operates free of government interference
economies of scale
factors that cause a producer's average cost per unit to fall as output rises
consumer cooperative
retail outlet owned and operated by consumers
Marginal utility
satisfaction or usefulness obtained from acquiring one more unit of a product
equilibrium
the point at which quantity demanded and quantity supplied are equal
diminishing marginal utility
the principle that our additional satisfaction, or our marginal utility, tends to go down as more and more units are consumed
deregulation
the removal of some government controls over a market
human capital
the skills and knowledge gained by a worker through education and experience
physical capital
the stock of equipment and structures that are used to produce goods and services
privatize
to transfer the ownership of factories from the government to individual citizens
variable
A factor that can change
medicare
A federal program of health insurance for persons 65 years of age and older
license
A government issued right to operate a business
subsidy
A government payment that supports a business or market
monopoly
A market in which there are many buyers but only one seller.
Oligopoly
A market structure in which a few large firms dominate a market
consumer
A person who purchases goods and services for personal use
producer
A person, company, or country that makes, grows, or supplies goods or commodities for sale
medicaid
A public assistance program designed to provide healthcare to poor Americans.
Three economic Questions
What to produce, how to produce, for whom
macroeconomics
Concentrates on the operation of a nation's economy as a whole.
Income causes a Change in Demand
DEMAND CURVE SHIFTS TO RIGHT: When income increases, consumers buy more product at each and every price. DEMAND CURVE SHIFTS TO LEFT: When income decreases, consumers buy less of good at each and every price.
CHANGE IN DEMAND
SHIFT OF THE DEMAND CURVE when people buy different amounts at every price results in a NEW CURVE or NEW DEMAND. A shift to the right shows an increase in demand. A shift to the left shows decrease in demand.
Taste causes a Change in Demand
Taste due to advertising, trends, seasons. SHIFT TO THE RIGHT: If a product is advertised, it increases popularity and people buy more at each and every price. SHIFT TO THE LEFT: If people get tired of a product, they buy less at each and every price.
law of supply
Tendency of suppliers to offer more of a good at a higher price
microeconomics
the branch of economics that studies the economy of consumers or households or individual firms
Economic system
The method used by a society to produce and distribute goods and services
dividend
The portion of corporate profits paid out to stockholders
gross domestic product
The sum total of the value of all the goods and services produced in a nation
services
actions or activities that one person performs for another
producer cooperative
agricultural marketing cooperative that helps members sell their products
entrepreneur
ambitious leader who combines land, labor and capital to create and market new goods and services
Quantity Supplied (Qs)
amount that sellers are willing and able to sell at a specific price.
price fixing
an agreement among firms to charge one price for the same good
collusion
an agreement among firms to divide the market, set prices, or limit production
traditional economy
an economic system in which custom decides what people do, make, buy, and sell
centrally planned economy/communism
an economic system in which the government makes all decisions on the three key economic questions
want
an item that we desire but that is not essential to survival
barrier to entry
any factor that makes it difficult for a new firm to enter a market
capital
any human-made resource that is used to produce other goods and services
business license
authorization to start a business issued by the local government
three indicators of economic stability
full employment, economic growth, stable prices
in-kind benefits
goods and services provided for free or at greatly reduced prices
substitutes
goods used in place of one another
public goods
goods whose benefits cannot be limited and that are available to all
regulation
government intervention in a market that affects the production of a good
workers' compensation
government program that extends payments for medical care to workers injured on the job
income effect
the change in consumption resulting from a change in real income
deteriminants of demand
income, consumer expectation, population, consumer taste, price of complements, price of substitutes
heavy industry
industry that requires a large capital investment and that produces items used in other industries
certificate of incorporation
license to form a corporation issued by state government
trust
like a cartel, an illegal grouping of companies that discourages competition
scarcity
limited quantities of resources to meet unlimited wants
market supply schedule
lists how much of a good or service all producers in a market are willing and able to offer for sale at each price
limited liability partnership (LLP)
partnership in which all partners are limited partners
limited partnership
partnership in which only one partner is required to be a general partner
general partnership
partnership in which partners share equally in both responsibility and liability
Economic concept necessitating choices
scarcity
predatory pricing
selling a product below cost to drive competitors out of the market
royalty
share of earnings given as payment
need
something like air, food, or shelter that is necessary for survival
economic growth
steady growth in the productive capacity of the economy (and so a growth of national income)
invisible hand
term economists use to describe the self-regulating nature of the marketplace
market power
the ability of a company to change prices and output like a monopolist
economic freedom
the ability of people to make their own economic decisions without interference from the government
trade-off
the alternatives that we sacrifice when we make a decision
shortage
the amount by which quantity demanded exceeds quantity supplied
production possibilities frontier
the line on a production possibilities graph that shows the maximum possible output
product market
the market in which households purchase the goods and services that firms produce
opportunity cost
the most desirable alternative given up as the result of a decision
private sector
the part of the economy that involves the transactions of individuals and businesses
public sector
the part of the economy that involves the transactions of the government
unit elastic demand
the percentage change in quantity demanded equals the percentage change in price; the resulting price elasticity has an absolute value of 1.0
underutilization
using fewer resources than an economy is capable of using
efficiency
using resources in such a way as to maximize the production of goods and services
Substitution effect
when consumers react to an increase in a good's price by consuming less of that good and more of other goods
economic efficiency
wise use of available resources so as to obtain the greatest benefits possible