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Economics Final Terms: Ch. 1-6; Ch. 11

Terms in this set (86)

Wants
A good/service that satisfies consumers without having the product needing to be a necessity for them to have.
Needs
The essential goods to be purchased in order to survive.
Economics
To understand the relationship between consumers' demand, supply, scarcity and other factors that play with a business's model when providing goods and services.
Goods
A commodity, service or product that can satisfy consumers and possibly have exchange value [terms of currency to be valuable]
Services
A non-physical good, more like work provided to a consumer to have a certain task to be completed in their exchange.
Scarcities
Understanding that resources have a limit and there is a consequence for the limitations for what is available; need to make choices under opportunity costs.
Shortages
The limited availability for providing resources/goods/services, specifically when times of disasters strikes - increase the price for people who are in desperate need to purchase them at a higher price than what they usually cost.
Factors of Production
Resources input to manufacture the output or the finished good/service. These factors include, land, labor, capital and even human capital.
Land
The natural resources used to make a product.
Labor
The work or effort put by machines/employees into a product.
Capital
Man-made technology that helps maintain factory work and assembly line.
Human Capital
What an employee or a worker learns from their skill from the factors of production -> know how to do certain tasks in their workplace.
Entrepreneur
A person that owns their own business and operates their own private enterprise where they can influence the supply of a product.
Trade-Off
The second or nearest best alternative made as a choice of needing to give up the first pick, in search for a better choice.
Guns or Butter
Choosing between domestic or foreign policies. Foreign policies referred to wars thus "guns", meanwhile "butter" is for the common policies that could improve the situation within a nation.
Opportunity Cost
Understanding the concept of scarcity and choice. There needs to be decisions made for supply because that is limited, meanwhile demand changes overtime. So the best alternative is taken, while sacrificing some other opportunity - which can even be better or worse depending on perspective/objective.
Thinking At the Margin
To evaluate the benefits and the costs of an economical decision. The benefits should outweigh the costs under any situation.
Economic System
A financial system where goods and services are provided to consumers through producing and distributing with influencers such as institutions, agencies, consumers, companies, and even entities that create the foundation for this system.
Traditional Economy
Using conservative traditions, customs, and beliefs to maintain the goods/services and how they are distributed to the people.
Market Economy
A true free market where the price for production/distribution of goods/services are controlled by privately owned businesses.
Centrally Planned Economy
A government regulated economic system where the government regulates the operations manages production facilities - economy under communism.
Command Economy
The government controls everything in the economic system. From operations, productions and distributions to the people - economy under socialism.
Mixed Economy
An economy where the government and private enterprise work together to regulate the market and other financial structures in society.
Market
A place where the interaction between buyers and sellers can arrange a relationship in terms of buying/selling a good/service.
Specialization
The concentration of productive efforts of individuals and firms on a limited number of activities. What is the business is "specified" to do?
Firm
A business organization such as a corporation/company that is in partnership with different levels of protection. Or a division of labor and production costs. An alternative to a market price that is set to protect businesses.
Profit
A capital gain that is a remainder from the total income and total monetary costs of a company, along with calculating the opportunity costs.
Self-Interest
To make economic decisions based on the selfish want for the best outcome.
Incentive
To motivate people producing products to work under a business - the dominant objective for creating their products in relations to society.
Competition
Where the free market has small business competing against larger business for the same benefits of boosting the economy and their business. Competition allows business to strive for more and even bring better products to their consumers. Substitutes can be an example of competition between companies that provide a similar objective - to keep a consumer satisfied with their product.
Invisible Hand/Laissez Faire
A free market where the government has little to no regulation of business's in a market. Private enterprise can flourish without being heavily scrutinized by the government.
Socialism
The government's complete control over their economy and private enterprises [may not be allowed]. They distribute, provide and give what is needed for their people.
Communism
Government mostly regulates businesses - there is private enterprise allowed, but that is regulated under the national government.
Collective
A group of people combining their efforts for a common goal.
Private Property
Where private businesses own and control their own instituted business. This allows business to directly be more effective in their business goals and even create competition between other similar companies geared towards a market economy.
Free Enterprise
A market where there are private businesses are able to compete in the same space without any government intervention to prevent those businesses - a free market.
Public Good
A good, commodity or service provided to the public without profiting off of it - the government, private businesses, non-profit organizations, etc. give back to the community.
Free Rider
A person that is able to receive the benefits without fully supporting the policy. Ex. bill passed to cut down on the negative externality of carbon pollution in the air produced by certain companies in a certain area. A business owner who disagrees, but still receives the benefits from the bill such as cleaner air.
Market Failure
The allocation of goods and services are not efficient or do not follow along with the law of supply/demand.
Externality
A cost or benefit coming from a transfer that affects third parties who are not part of the transaction. There can be positive and negative externalities that come from a business. Ex. pollution coming from producing a certain product - negative externality. Building a generator close to a waterfall, which provides a power to an entire community - positive externality.
Poverty Threshold
The minimum for the level of income to be adequate enough to survive on their own without entitlements. If someone is below the poverty threshold line drawn, then there are welfare programs and temporary relief to be given for them to get out of their situation.
Welfare
Programs provided to benefit the people under the poverty threshold to receive payment to get out of the government investing in their well-being - for people to get out of poverty.
Cash Transfers
Direct payments of money given to qualifiable people. The state and federal government can provide these transfers to people.
Investment
Purchase of goods not consumed by today yet, but in hopes of it becoming a success in the market, where the monetary asset can be sold for a higher price in the expectant future for profit.
Financial Asset
A non-physical embodiment of wealth: stocks, bonds, bank deposits, currency, credits, loans, etc.
Financial Intermediary
An institution or individual that acts as a third party for different parties in a financial transaction. The bank is a great example, they provide space for deposits and use those funds to transform them into loans.
Mutual Fund
A collective fund for consumers/investors to place their money to purchase security investments. The general public buys more mutual funds and collect a pool of money for their benefits or to support a collective effort to invest in something important.
Diversification
For consumers/investors to diversify the amount of stocks bought, so that they can have a wide variety of shares to make capital gains of and diversify their market.
Return
Something to receive from distributions/payments given to the different suppliers of the factors of production.
Coupon Rate
An interest rate placed upon bonds, notes, etc. known as the principal of the face/par value. It is also known as coupon yield, where the bond issuer pays their bond purchaser the rate based on the calculated par value of their bond they are trying to sell.
Maturity
The due date for the payment to the bondholder.
Par Value
The amount an investor purchases the bond from a bond issuer, where the bond issuer will have to repay that money back to the bond buyer at the time of maturity [even with the coupon rate].
Share
Rent or borrow assets owned by someone else.
Capital Gain
Earning profits from investments.
P/E Ratio
Price to earnings ratio, where the invested money put into a company over the expected return from the company. It is better for the company to receive more investment over the earnings for consumers/investors to be higher -> shows the growth of a company.
Stock Split
To provide more stocks under a reasonable price for more investors to invest into those shares of a company. As the number of shares increases, price per share goes down; however, the market cap remains the same.
NASDAQ-Amex
A specific stock market meant for the investment of high-technology and energy stock.
Bull Market
A market where the stocks are rising. Bulls rise their horns up, so the stock market's value is increasing.
Bear Market
A market where the stocks are failing. Bears slash downwards, so the stock market's value is decreasing.
The Dow Jones
Shows the top 30 companies [in various industries] in terms of how it has changed overtime in value.
Law of Demand
When the price of the quantity of supply is high, the demand is low and when the price of the quantity of supply is low, the demand is high.
Substitution Effect
The ability for a consumer to use the trade-off alternative product if the product they wanted to buy did not match their expectations - creates more elasticity in demand for a certain good.
Income Effect
An effect that prices, taxes, and wages that affect people's behavior in consumption over time. Taxes and other factors that cut down on a consumer's income will affect the way they make decisions for buying a product, even for leisure, they will buy less leisure products.
Normal Good
When the consumers buy more of a good because of their higher income influencing their demand; it is the opposite for when their income decreases they loose demand for a product, while the price remains the same.
Inferior Good
Although the income of a person increases, the demand for an inferior good decreases because the consumer has no need to buy such a product.
Compliments
These are products that go well along with each other. Ex. Ice Cream and Waffle Cone.
Substitutes
Products that can be interchangeable and replace one another if one product in competition raises it's price.
Elasticity of Demand
The consumer's perspective to change their demand based on the price of a product and other determining factors such as time, consumer's relative importance, availabilities of substitutes, and even the comparison to necessities and luxury goods.
Law of Supply
When the price of a supply is high so will the availability for its products. When the price of a supply is low, so will the supply given out will be low. This creates a scarcity for people to have limitations on the timing for what they need to consume - can be more flexible depending on the company's main objective.
Elasticity of Supply
The producer's response to the changes in the market in terms of price. When the price of a product rises, it makes it easier to supply more of the product. It is the ratio of the proportionate change in the quantity supplied over the proportionate change in price.
Fixed Cost
Indirect costs/overheads that are dependent on time such as salaries, rents, etc. that are paid by a due date. It is not dependent on the costs of production in the business for the level of goods/services provided.
Variable Cost
Other costs based on factors that play a role. Ex. need of electricity to manufacture goods, with the cost of electricity on the business.
Total Cost
The sum of the fixed cost and the variable cost.
Operating Cost
The expenses of the operations behind an equipment making a good or even for the maintenance of the technology.
Subsidy
Tax reduction or payment provided from the government in order to help out business, individuals, and the public.
Excise Tax
A tax placed on the production of a good or even a sale for a good. The excise tax would indicate the government regulating the supply of a product for a business.
Regulation
When the government regulates the quantity/quality/price of supply in a market with subsidies, excise taxes, tariffs, raise price/lower prices, etc.
Equilibrium
Where the supply and demand is met exactly at the same point. If it is at disequilibrium then the buyers and sellers would push the market back to equilibrium at some point.
Disequilibrium
Where the supply provided and demand do not meet at the same value.
Excess Demand
Where there is too much demand for a product without enough being supplied.
Excess Supply
Where there is too much supplied and the demand for the product is below compared to the supply given.
Price Ceiling
The maximum price that be established. Ex. rent control in NYC to prevent rent from being overly priced where people cannot buy the rent.
Rent Control
A price ceiling regulated by the government to prevent the price for renting from being too expensive.
Minimum Wage
The price floor for the average salary of worker's that is held at a minimum - government regulation to prevent workers from receiving a pay that does not benefit them.
Spillover Costs
Costs that affect outside of what is produced that may or not be controllable. Ex. A company spills its waste into a lake [negative externality where the government will regulate it's activities to clean up the area].
Price Floor
The minimum price that can be established. Ex. minimum wage for workers' compensation - needs to have a line drawn for more successful small companies [even bigger] to understand they cannot give anything lower than that as a wage.
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