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goals 7 and 8 monster review
Terms in this set (88)
sacrifice one thing to obtain another
The alternative that is not chosen from a trade off
Thinking at the margin
the process of deciding whether to do or use one additional unit of some resource
all natural resources used to produce goods and services
the effort people devote to tasks for which they are paid
any human-made resource that is used to produce other goods and services
the human-made objects used to create other goods and services
the knowledge and skills a worker gains through education and experience
the willingness to take risks and develop, organize and manage a business venture in a competitive global marketplace that is constantly evolving
production possibilities frontier
a curve depicting all maximum output possibilities for two goods, given a set of inputs consisting of resources and other factors
the use of fewer resources than the economy is capable of using
law of diminishing marginal returns
as one input variable is increased, there is a point at which the marginal increase in output begins to decrease, holding all other inputs constant
business costs, such as rent, that are constant whatever the quantity of goods or services produced.
a cost that varies with the level of output.
the total expense incurred in reaching a particular level of output
the cost added by producing one extra item of a product.
the increase in revenue that results from the sale of one additional unit of output
cost benefit analysis
a systematic approach to estimating the strengths and weaknesses of alternatives that satisfy transactions, activities or functional requirements for a business.
a method of production where a business or area focuses on the production of a limited scope of products or services in order to gain greater degrees of productive efficiency within the entire system of businesses or areas
division of labor
Dividing a job into many specialized parts, with a single worker or a few workers assigned to each part
a fixed regular payment, typically paid on a daily or weekly basis, made by an employer to an employee, especially to a manual or unskilled worker.
a fixed regular payment, typically paid on a monthly or biweekly basis but often expressed as an annual sum, made by an employer to an employee, especially a professional or white-collar worker.
arrangement that allows buyers and sellers to exchange money for goods and services
free market economy
individuals own the factors of production and make their own economic decisions
circular flow of economy
physical and monetary flow between households and firms
private ownership of resources, self interest motive, consumer sovereignty, markets where goods and services are exchanged, competition
5 basic concepts of a market economy
the situation in an economy where the desires and needs of consumers control the output of producers.
Father of economics, wrote the Wealth of Nations, believed in a non government regulated economy
John Maynard Keynes
it is sometimes necessary for the govt. to step in and regulate the economy
wrote the Communist Manifesto
abstention by governments from interfering in the workings of the free market.
Motivating force of the market
Regulating force of the market
ritual, custom and tradition answer the questions of what to produce, how to produce, and for whom to produce
The central government makes all decisions on the production and consumption of goods and service
All economic decisions are made by individuals (the US has a market economy)
economic systems that combine characteristics of more than one type of economy
The desire to own something and the ability to pay for it
a graph showing how the demand for a commodity or service varies with changes in its price.
law of demand
price and demand have an inverse relationship
a table that lists the quantity of a good all consumers in a market will buy at every different price
shift in the demand curve
(change in external factors) price of a substitute, price of a complement, change in income, consumer expectations, consumer tastes, population size
movement along the demand curve
(change in price)
change in price affects the qty. demanded (ex. soft drinks) (if a good has many substitutes then its demand is elastic)
change in price does not affect the qty. demanded (ex. medicine)
elasticity of demand
a measure of how consumers react to a change in price
The amount of goods available
graphic representation of the relationship between product price and quantity of product that a seller is willing and able to supply
law of supply
price and supply have a direct relationship
a tabular depiction of the relationship between price and quantity supplied
Shift in supply curve
(change in external factors) cost of an input, change in technology, government regulations, change in taxes, govt. subsidy)
movement along supply curve
(change in price) -supply
elasticity of supply
a measure of the way quantity supplied reacts to a change in price
change in price affects the quantity supplied
- change in price does not affect the qty. supplied (ex. Van Gogh painting)
the point where supply equals demand for a product
qty. demanded is greater than qty. supplied
qty. supplied is greater that qty. demanded
a government- or group-imposed price control or limit on how low a price can be charged for a product
a government-imposed price control or limit on how high a price is charged for a product
general increase in the prices of goods
a substantial drop in prices
the use of government spending and taxation to influence the economy
expansionary policy (during recession)
Govt. should increase spending
Govt. should decrease taxes
contractionary policy (during inflation)
Govt. should decrease spending
Govt. should increase taxes
Perfectly competitive markets
always efficient, at equilibrium, many buyers and sellers, sellers sell identical products, buyers are well informed about products, sellers are able to enter and exit the market freely. (few markets are perfectly competitive b/c of barriers)
A market dominated by a single seller
Sherman Antitrust Act
a market in which a few large firms dominate
unlimited liability, limited life, limited access to resources, easy start-up, sole receiver of profit
unlimited liability, partners do not have absolute control, larger pool of assets
(owned by stockholders, profits called dividends) limited liability, transferable ownership, difficult to start up
a business est. under an authorization to sell a company's goods in a particular area
a merger occurring between companies in the same industry
a merger between two companies producing different goods or services for one specific finished product
a corporation that is made up of a number of different, seemingly unrelated businesses
right to work laws
prohibit union security agreements, or agreements between employers and labor unions, that govern the extent to which an established union can require employees' membership, payment of union dues, or fees as a condition of employment
a profit from the sale of property or of an investment.
the difference between a lower selling price and a higher purchase price, resulting in a financial loss for the seller.
a market in which share prices are rising, encouraging buying.
a market in which prices are falling, encouraging selling.
an investment program funded by shareholders that trades in diversified holdings and is professionally managed.
currency that a government has declared to be legal tender, but is not backed by a physical commodity
money whose value comes from a commodity of which it is made
12 regional banks, regulate the distribution and flow of money, implement monetary policy
control the amount of currency available
a certificate issued by a bank to a person depositing money for a specified length of time.
the trade in short-term loans between banks and other financial institutions.
a bond issued by the government and sold to the general public.
Recommended textbook explanations
Krugman's Economics for AP*
David Anderson, Margaret Ray
Principles of Economics
N. Gregory Mankiw
Krugman's Macroeconomics for AP*
David Anderson, Margaret Ray
Essentials of Economics
N. Gregory Mankiw
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