Economics EOCT Review (ALL TERMS)
For Coach Hussion's Economics Classes.
Terms in this set (...)
The study of the allocation of scarce resources and goods
Resources/Factors of Production
The inputs used by a society to produce outputs. Such as: Land, Labor, Capital, and Entrepreneurs
The factor of production that includes tools, machinery, and buildings. Ex: warehouses, computers, money
The factor of production that includes all NATURAL RESOURCES (timber, oil, iron ore)
The factor of production that includes the knowledge, experience, and skills of workers. Can be improved with training and education.
The BASIC CONDITION that exists because of unlimited wants and limited needs.
The value of the best alternative that could have been chosen but was not. The SATISFACTION missed out on.
Concentrating on a single activity or area of expertise
Ex: Dividing labor in an assembly line.
(Free) 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
Mixed System (Capitalism)
An economy that incorporates aspects from different economic systems
A type of economy in which people tend to barter goods and services and stay in their classes. The son of a farmer would be a farmer.
Ex: 10th Century England, The Middle Ages
Production Possibility Curve
A graph that describes the maximum amount of one good that can be produced for every possible level of production of the other good.
The study of how individuals and businesses interact within an economic system
Another word for businesses
Law of Supply
As price goes us, supply goes up.
As price goes down, supply goes down.
Causes of a right shift (increase) in supply
Favorable growing conditions
Law of Demand
As price goes up, demand goes down
As price goes down, demand goes up
Causes of a left shift (decrease) in demand
Consumer expectations of lower future prices
Fads or consumer tastes changing
Equilibrium price (Market Clearing Price)
The price where demand exactly equals supply.
A good that satisfies most of the same needs as the original good. Ex: Laura Lynn or Store Brands
Goods that tend to be used together
Ex. hotdogs and hotdog buns, skis and ski boots
A minimum price, (that the gov't. sets), for which a product can be sold. Ex: minimum wage
THESE CAUSE SURPLUSES
A maximum price, (that the gov't. sets), at which a good can be sold. Ex: rent control
THESE CAUSE SHORTAGES
When the demand doesn't change very much even with a high price change. These are typically needs.
Ex: cancer medication
When the demand changes greatly even with a small price change. These are typically wants or luxuries.
Ex: a yacht
A single owner who takes all the financial risks and reaps all the financial rewards. Unlimited liability!
Divides up the risk and reward among a group of people. Limited Liability. Most common type is a GENERAL PARTNERSHIP.
Issue STOCK to raise money. The major weakness is DOUBLE TAXATION!
Market structure with ONE producer, high barriers to entry, and no competition. They have full price control. They are illegal in the U.S. due to Ant-Trust Laws.
Pure (perfect) Competition
Market structure with many producers, low barriers to entry, unlimited competiton, and identical products.
Ex: Vegetable Stands
Market structure with many producers, low barriers to entry, much competition, and differentiated products.
Ex: Fast Food, Same type of product with different QUALITIES!
Market structure with only a few producers, high barriers to entry, and little competition
EX: Coke and Pepsi
Watch out for price fixing with these!
Allowed to exist because it would be inefficient / chaotic to have more than one provider. Ex: Power Company, Water Company.
The Main Function Of Money
Money is mainly used as a medium of exchange.
The STUDY of the economic issues of an entire nation
GDP, Trade Deficit, Fiscal and Monetary Policies!!!
Gross Domestic Product Formula
Consumer Spending + Investment + Government Spending + Net Exports (Xports - Mports) :)
Exports - Imports (X - M)
A rise in the price level
Consumer Price Index
Used to measure the monthly inflation rate of regular goods that we use everyday.
Demand for ALL goods and services within a nation
Supply of ALL goods ans services within a country
The Business Cycle
The normal ups and downs of the economy.
Expansion - Peak - Contraction - Trough
A temporary decrease in GDP that lasts for more than two consecutive quarters
A steep fall in GDP (more than 10%) combined with a high unemployment rate for more than a year
Occurs when you have job skills that do not match the job requirements.
EX: Jobs getting shipped to other countries
EX: Losing your job to a robotic arm
Unemployment that occurs while peole are looking for a job that is a good fit.
Unemployment that rises during a downturn in the economy. The government is the MOST concerned with this type!
EX: Jimmy loses his job. His auto plant closed due to a recession.
When government spends more money than it takes in.
We have had one every year except ONE over the last three decades.
When a government operated with a deficit for many years, they build and form this.
Ours is OVER 16 TRILLION!
Federal Reserve System
Created by Congress and acts as the nation's central bank. It controls the nation's money supply through monetary policy.
Refers to changes in the money supply of a nation in order to influence its economy. The Federal Reserve controls it.
Government expenditures, taxes, and borrowing in order to influence an economy
The tax rate increases as income increases.
THIS IS THE UNITED STATES FEDERAL ICOME TAX SYSTEM. (The more you make, the more you get taxed)
Tax rate decreases as income increases. This type of tax hurts poor people the most.
EX: Sales Tax
A flat tax; it does not change with respect to income and is based on a flat percentage.
Comparative Advantage in Trade
When countries make decisions as to which goods to produce and which to trade for based on the lowest OPPORTUNITY COST. It is the reason for ALL trade!
The ability to produce more of a given product using a given amount of resources
Balance of Trade
The value of all products exported from a country minus the value of all products imported
Balance of payments
The value of all the money $$$ that enters and leaves the country.
A tax on an imported good
A limit on the amount of a good that is allowed into a country. EX: Only trading a certain amount of rugs with India to protect U.S. carpet jobs.
A government completely prohibits the import of an item. EX: Cuba
Used by governments to ensure the safety of imported goods. Ex: Recalling toys made in China with lead filled red paint.
Government payments to a supplier to reduce the production costs of the supplier and INCREASE SUPPLY! Ex: Paying farmers or gas producers to keep costs down for the consumer.
The measure of the price of one nation's currency in terms of another nation's currency
Money used with the expectation of some future return or benefit usually for RETIREMENT!!!
A safe means to store earnings, keep checking accounts, and get loans.
Also known as Treasury Bonds. The Federal Reserve buys and sells these with the Open Market Committee.
Corporations issue these in return for partial ownership of the company, the investor gives that corporation their money to spend
Interest is only applied to the value of the principal of the loan. Interest accrued is typically an even number.
Ex: $1000 loan for one year = $75.00 interest
Interest is applied to the value of the loan PLUS other interest!
Ex: $1000 loan for one year = $115.73 interest
(North American Free Trade Agreement)
Broke down the trade barriers and allowed free trade between The U.S.A., Mexico, and Canada
Fixed Exchanged Rate
When the value of a currency is set to the value of another currency.
Floating Exchange Rate
Exchange rates that are allowed to fluctuate in the open market in response to changes in supply and demand. Sometimes call free exchange rates or floating exchange rates.
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