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Economics EOC

Terms in this set (81)

Economics
A social science studying the allocation of scarce resources and goods
Resources/factors of production
The inputs used by a society to produce outputs
Goods
Finished products
Scarce
Short in supply
Allocate
To distribute according to some plan or system
Opportunity Cost
The value of the best alternative that could have been chosen but was not
Marginal Cost
The cost of producing one more item
Marginal Benefit (Marginal Revenue)
The benefit associated with one additional item
Specialization
Concentrating on a single activity or area of expertise
Market System
Private individuals and firms control all resources and the price and quantity of all goods are determined by the interaction of suppply and demand
Command System
The government controls all markets determining what to produce, how to produce, and for whom to produce
Mixed System
An economy that incorporates aspects from different economic systems
Production Possibility Curve
The maximum an economy can produce based on all inputs
Microeconomics
The interaction of people and businesses within a single market
Firm
Another term for business
Supply
The quantity of goods or services that someone is able and willing to supply at different prices
Law of Supply
The quantity supplied is typically directly proportional to the pirce, all other things being equal
Law of Demand
The quantity demanded is typically inversely proportional to its price, all other things being equal
Equilibrium price
The price where demand exactly equals supply
Equilibrium quantity
The quantity where demand exactly equals supply
Substitute Good
A good that satisfies most of the same needs as the original good
Complementary Good
Goods that tend to be used together
Price Floor
A minimum price for which a product can be sold
Price Ceiling
A maximum price at which a good can be sold
Price Elasticity
The percentage change in quantity divided by the percent change in price - to track how mch a change in price affects a change in quantity
Inelastic
When change in price is greater than the change in quantity demanded
Elastic
A good that is very sensitive to changes in price
Sole Proprietorship
A single owner who takes all the financial risks and reaps all the financial rewards
Partnership
Divides up the risk and reward among a group of people
Corporations
Issue stock
Dividends
Monetary payments to stockholders
Monopoly
Market structure with one producer, high barriers to entry, and no competition
Price maker
A company that has control over what it wants to charge people
Pure (perfect) Competition
Market structure with many producers, no barriers to entry, unlimited competiton, and identical products
Price Taker
A company that has no control over price - it is solely determined by supply and demand
Monopolistic Competition
Market structure with many producers, low barriers to entry, much competition, and differentiated products
Oligopoly
Market structure with few producers, high barriers to entry, and little competition
Macroeconomics
The study of the economic issues of an entire nation
Gross Domestic Product
Consumer expenditures + business investment + Government expenditures + Net Exports
Net Exports
Exports - Imports
Inflation
A rise in the price level
Price Index
Used to measure all future GDP in terms of of the base year prices
Aggregate Demand
Demand for ALL goods and services within a nation
Aggregate Supply
Supply of ALL goods ans services within a country
Recession
A decrease in total output that lasts for more than two or three consecutive quarters
Depression
A steep fall in total output combined with a high unemployment rate for more than a year
Stagflation
When prices rise and GDP falls
Structural Unemployment
Occurs when you have job skills that do not match the job requirements
Frictional Unemployment
Unemployment that occurs while peole are looking for a job that is a good fit
Cyclical Unemployment
Unemployment that rises during a downturn in the economy
Deficit
When government spends more money than it takes in
National debt
When a government operated with a deficit for many years, they build and form this
Federal Reserve System
Created by Congress and acts as the nation's central bank
Monetary Policy
Refers to changes in the money supply of a nation in order to influence its economy
Fiscal Policy
Expenditures, taxes, and borrowing made by a government in order to influence an economy
Absolute advantage
A country can produce more of a good than another country
Balance of Trade
The value of all products exported from a country minus the value of all products imorted
Balance of payments
All the economic transactions of a country
Tariff
A tax on an imported good
Quota
A limit on the amount of a good that is allowed into a country
Embargo
A government completely prohibits the import of an item
Standards
Used by governjments to ensure the safety of imported goods
Subsidy
Payments to a supplier to reduce the production costs of the supplier
Exchange Rate
The measure of the price of one nation's currency in terms of another nation's currency
Apprecite
To increase in value or strengthen
Depreciated
To decrease or weaken in value
Savings
Money deposite secured for a later use
Investment
Money used with the expectation of some future return or benefit
Bank
A safe means to store earnings
Credit Union
Similar services as a bank, but provided only to members
Savings and Loan
Takes deposits and focuses on mortgages and savings
Payday loan company
Provide small loans in return for a portion of an upcoming paycheck
Bonds
An investment that provides a promise to repay the investment plus interest
Stocks
In return for partial ownership of the company, the investor gives that corporation their money to spend
Mutual fund
A collection of various investments
Progressive Tax
The tax rate increases as income increases
Regressive Tax
Tax rate decreases as income increases
Proportional Tax
A flat tax; it does not change with respect to income
Credit worthiness
A measure of whether you'll be able to pay back a loan properly
Simple Interest
Principle X Rate X Time
Compound Interest
Future interest is determined with the existing amount owed
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