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69 terms

MW DECA Economics

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Economics
the social science that examines how societies use scarce resources to meet people's needs and wants.
Free Enterprise System/ Capitalist System
people are free to own and control businesses; U.S. is a free enterprise economy.
Market Economy
Decisions about what to produce, how, and for whom are decided by individuals acting in their own self-interest; Individuals own & control the society's resources; Capitalist system with free markets (buyers and sellers come together to exchange goods/services); Examples: smaller markets like auctions and e-Bay
Command Economy
Decisions about what, how and for whom are decided by a central government; Controlled economy; Government owns resources; Consumers have no say about the economic decisions; Examples: Communist countries like North Korea, Cuba
Traditional Economy
Decisions about what, how and for whom are based on long-standing customs and beliefs of the society; People are self-sufficient; Limited technological advancement; Very rare today
Mixed Economy
Combination of command and market; Free market with some government control; Most countries today are Mixed with varying degrees of command (China) and market (America)
Scarcity
Unlimited needs and wants; limited resources. This is the PROBLEM that causes economic systems to develop.
Needs
goods/services that are necessary for people to survive. Examples: Food, water, shelter, basic clothing.
Wants
goods/services people desire that are not necessary
Goods
physical objects (tangible) that are produced for consumers. Examples: Clothes, school supplies, CD's, electronics, food, etc.
Services
Actions that are performed for consumers (intangible). Examples: Public transportation, school, utilities, car wash, banking, entertainment, etc.
Resources
anything that is useful in the process of achieving goals or solving problems. INDIVIDUAL RESOURCES: (money, time, skills, personal energy, tools, community agencies, etc). SOCIETIES RESOURCES: (natural resources, power, communication & transportation systems, factories & equipment, productive workers, etc)
Opportunity Cost
the value of the best alternative given up; every time you buy a good or service, you are giving up something else. Example: A society decides to build a factory on farm land. The opportunity cost is the value of the crops that will no longer be able to be grown on that land.
Specialization
focusing on producing a particular good or service that you are able to do well; Example: You choose a career that you enjoy and are good at—you specialize in that career, and can be more productive at it then someone who is not specialized in that field
Productivity
measure of efficiency with which goods and services can be produced
Demand
quantity of a particular good or service that CONSUMERS are willing and able to buy at a given price
Law of Demand
As price goes up (down) quantity demanded goes down (up); Inverse relationship
Supply
quantity of a particular good or service that PRODUCERS are willing and able to make available for sale at a given price
Law of Supply
As price goes up (down) quantity supplied goes up (down); Direct relationship
Equilibrium price
The point where supply and demand equal is called equilibrium price; this is the price at which consumers are willing to buy the product, and producers are willing to make a product
Consumer Price Index (CPI)
This number is a measure of the change in price that an average consumer pays for a pre-defined "market basket" of goods and services. As such, CPI is sometimes referred to as the cost-of-living index, because it literally measures the average consumer's cost of living. To calculate the % increase in prices (inflation) from CPI use this calculation: (CPI-100)/100. For example if CPI is 110 then the increase in prices is 10% (110-100) / 100 = 10%.
Gross Domestic Product (GDP)
The sum total of the market place of all the final goods and services produced within a country's borders during a given period of time. To calculate GDP add all the consumer and government spending to the total business investments, and then also add in the country's net exports (actual exports minus actual imports).
Unemployment
when an individual is actively looking for a job or who has been laid off temporarily
Unemployment rate
the ratio of the unemployed to the labor force (number of unemployed persons + the number of employed persons); reflects the number of people who would prefer to be working but are not.
Interest rate
what you pay lenders for the use of their money (usually expressed in an annual percentage rate)
Inflation
General increase in prices of goods and services over time.
Business cycles
consecutive phases of expansion and contraction
Recession/Contraction
period of economic slowdown often marked by high rates of unemployment, plunging stock prices, lower corporate profitability, and consumer anxiety.
Depression
a major economic slowdown, longer lasting and more serious than a recession
Recovery/Expansion
period of economic growth often marked by decreasing rates of unemployment, increasing stock prices, increasing corporate profitability, and decreasing consumer anxiety
Prosperity
is the state of flourishing, thriving, success, or good fortune
North American Free Trade Agreement (NAFTA)
Launched on January 1, 1994, NAFTA is one of the most successful trade agreements in history and has contributed to significant increases in agricultural trade and investment between the United States, Canada and Mexico and has benefited farmers, ranchers and consumers throughout North America.
Producer
a company that manufactures a product
Consumer
someone who uses goods and services
Intermediaries
is a third party that offers intermediation services between two trading parties
Break-Even Point
when a business's expenses are exactly the same as their income
Revenue
total money brought raised by a company
Expenses
all money spent on maintaining the business
Profit
When revenues are greater than expenses
Loss
When expenses are greater than revenues
Assets
items of value that you own, including money.
Liabilities
debts or obligations owed to others
Owner's Equity
owners rights to the assets of the company
Warranty
a guarantee of the soundness of a product or service
Loss Leader
an item priced below the retailers cost in order to attract customers to a store
Equity
generally refers to the buying and holding of shares of stock on the stock market in anticipation of income from dividends and capital gain
Bonds
certificates of debt
Competition
rivalry between two or more businesses that offer the similar goods or services. Each tries to win a larger share of the market.
Price fixing
is an agreement between participants on the same side in a market to buy or sell the same, product, service, or commodity only at a fixed price or maintain the market conditions such that the price is maintained at a given level by controlling supply and demand
Monopoly
a situation in which a single company controls the supply of a good or service for which there is no close substitute.
Federal Reserve System
The central bank of the United States
Monetary Policy
efforts by the Federal Reserve Board to stabilize the economy by regulating the money supply.
Fiscal Policy
The Federal Governments use of taxing and spending policies to help stabilize the economy
Discount rate
the interest rate that banks pay when borrowing money from the Federal Reserve Bank
Reserve requirement
the percentage of a bank's deposits that it must keep on hand
Federal Deposit Insurance Corporation
a federal agency that insures deposit accounts in most banks and savings associations
Taxes
to impose a financial charge or other levy on a taxpayer by state or federal
Budget
an estimate of anticipated income and expenses for a certain period of time
Organized labor
An association of workers united as a single, representative entity for the purpose of improving the workers' economic status and working conditions through collective bargaining with employers.(unions)
Law of diminishing returns
When increasing amounts of one factor of production are employed in production along with a fixed amount of some other production factor, after some point, the resulting increases in output of product become smaller and smaller. Example: in an industrial setting might be a widget factory that features a certain number of square feet of work space and a certain number of machines inside it. Neither the space available nor the number of machines can be added to without a long delay for construction or installation, but it is possible to adjust the amount of labor on short notice by working more shifts and/or taking on some extra workers per shift. Adding extra man-hours of labor will increase the number of widgets produced, but only within limits. After a certain point, such things as worker fatigue, increasing difficulties in supervising the large work force, more frequent breakdowns by over-utilized machinery, or just plain inefficiency due to overcrowding of the work space begin to take their toll. The marginal returns to each successive increment of labor input get smaller and smaller and ultimately turn negative.
Economies of Scale
are the cost advantages that a business obtains due to expansion
Cost/Benefit Analysis
are the cost advantages that a business obtains due to expansion project or appraisal, an informal approach to making decisions of any kind
International trade
trade between other countries
Tariffs
a tax on imports
Form Utility
One of the five types of utility provided by marketing; when someone makes something, they assemble a product from parts and you can use it
Task Utility
One of the five types of utility provided by marketing; when someone does something for you, like put ice cream in a cone, or change the oil in your car
Time Utility
One of the five types of utility provided by marketing; making sure the product is available when people need it
Place Utility
One of the five types of utility provided by marketing; making sure the product is accessible, bring it to the customer, or have it in convenient place
Possession Utility
One of the five types of utility provided by marketing; letting the customer have the product, usually after they pay, they can "possess" it and hold it, transport it etc.