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36 terms

Econ - Fall - Test 2

STUDY
PLAY
economics
concerned with the production, distribution, and consumption of goods and services. __________ is the study of how to allocate limited resources (scarcity) among competing uses in order to satisfy virtually unlimited wants.
government
In a "command economy", who controls what to produce, how to produce it, and for whom?
the market itself
In a "free market", who controls what to produce, how to produce it, and for whom?
economic model
a quantified (mathematical or graphical) tool of analysis developed in order to understand a complex reality
Capital Asset Model
CAP-M
models
__________ are effective for understanding investor, consumer, and producer perspective
production possibilities model
depiction of the varying quantities of two products that a firm (or country) can produce
land, labor, capital, entrepreneurship
Four factors of production
capital
money and human-made instruments of production
interest
payment for the use of capital, price paid for the borrowing of funds, OR rate of return for money invested
principal
original amount of loan or investment (bond)
circular flow model
The movement of goods and services, factors of production, and money in an economy
goods and services
when $expenditures go to firms, __________ __________ __________ go to the household
$ payments
When the 4 factors go to firms, __________ go to the household
perfect competition
hundreds of sellers
makers
monopolies are price __________
monopolistic-competition
10-100 sellers
oligopoly
2-10 sellers
land
ex: unimproved real estate
labor
ex: people
capital
ex: tractors, grape seeds
entrepreneurship
ex: farmer
Law of Demand
Willingness of consumers to purchase amounts of a product at given prices
taste, income, price of related goods
Change in __________ __________ __________ are factors that cause a change in demand
price elasticity of demand
responsiveness of buyers to change in price
elastic product
large part of budget, many substitutes, luxury
inelastic product
small part of budget, no substitutes, necessity
Law of Supply
Quantities of a product that firms are willing and able to provide at various prices
cost of production, demand for other goods
Factors that cause a change in supply are a change in __________ __________
elasticity of supply
the responsiveness of producers to changes in price
price ceiling
government artificially keeping prices below equilibrium
price floor
government price support of a good whose price would normally be below equilibrium (market) price
land
Payment for __________ is rent
labor
Payment for __________ is wages
capital
Payment for __________ is interest
entrepreneurship
Payment for __________ is profit