Economics: CIA #1

What is scarcity?

Limited quantities of resources to meet unlimited wants

What is opportunity cost?

the loss of potential gain from other alternatives when one alternative is chosen.

What are the factors of productions?

land, labor, capital, and entrepreneurship

What are factor payments?

The income people receive for supplying factors of production: land, labor, and capital.

What is the factor payment/income for land?

rent

What is the factor payment/income for labor?

wage

What is the factor payment/income for entrepreneurial ability?

profit

What is the factor payment/income for capital?

interest

What is the circular flow model?

A model that demonstrates how money moves through society

What are the components of the circular flow model?

households, businesses (firms), the government, good and services market, & resources market

What are the primary economic goals for economic systems?

economic efficiency, freedom, security, equity, growth, & sustainability

What are the 3 basic economic questions?

what, how, for whom to produce

What is the law of demand?

there is an inverse relationship between price and quantity demanded

What is the law of supply?

there is a direct relationship between price and quantity supplied

Supply speaks to __________ behavior?

business

Demand speaks to ___________ behavior?

consumer

For demand think a ____________.

Teeter totter

For supply think ____________.

Elevators

These are the shifters of _________.

1. Tastes and Ads

2. Number of Consumers

3. Price of Related Goods

4. Income

5. Consumer Expectations

demand

These are the shifters of ___________.

1. # of Sellers

2. Expectations

3. Technology

4. Input Price

supply

What is a supply curve?

graphs of the relationship between the price of a good and the quantity supplied

What is a demand curve?

a graph of the relationship between the price of a good and the quantity demanded

What does IRDL stand for in relation to demand and supply curves?

Increase to the Right, Decrease to the Left

What is the impact of subsidies and taxes on supply?

Subsidies increase supply by lowering production costs, while taxes decrease supply by raising production costs.

What is the difference between movement along the curve and shifting of the curve?

Movement occurs when price changes, affecting quantity demanded or supply. Shift occurs when a non-price factor changes.

What are the main type of business organizations?

sole proprietorship, partnership, & corporation

What is liability?

the legal obligation to pay debts/injury settlements incurred by the business

What are the advantages of a sole proprietorship?

full control, easy to start, and owner receives all profits

What are the disadvantages of a sole proprietorship?

unlimited liability, short lifespan, limited resources, and difficult to raise capital

What are the advantages of a partnership?

shared responsibility, more capital, and diverse skills

What are the disadvantages of a partnership?

shared profits, conflict between partners, and unlimited liability (general partnership)

What are the advantages of a corporation?

limited liability, easier to raise capital, and long lifespan

What are the disadvantages of a corporation?

double taxation, more regulation, and less control for owners

What are the 2 types of partnership?

General Partnership & Limited Partnership

What is a general partnership?

All members participate in operation and management of business

What is a limited partnership?

A partnership with at least one general partner AND at least one limited partner who is not active in day to day business.

What are the types of liability?

unlimited and limited

A government payment that supports a business or market.

Subsidy

A financial charge imposed by the government on income or profits.

Tax

What is the difference between factor payment and factor income?

Factor payments is the what the business pays for the use of FOPs. Factor income is the flow of income from FOPs.

Factor payment regards the ________.

Business

Factor income regards the _________.

Household