Econ Final

Scarcity

All resources are limited

Trade Offs

Giving up one option for another

Opportunity Costs

The value of the thing you gave up

Demand Shifters

Income, number of buyers, substitutes, expectations about future prices, complements, taste

Supply Shifters

Cost of production, number of suppliers, expectations about future prices

Total Revenue

All the money you bring in

Total Revenue Formula

TR = prices * quantity

Marginal Revenue

The extra money you make from selling one more item

Marginal Revenue Formula

MR = change in TR/change in quantity

Total Cost Formula

Fixed costs + variable costs

Fixed Cost

Have to pay even if you don’t make a profit

Variable Costs

Change based on how much you practice

Marginal Costs

Extra cost for producing one more item

Marginal Cost Formula

MC = change in total cost/ change in quantity

Total Profit

Money businesses keep after subtracting costs

Total Profit Formula

TP = total revenue - total cost

Marginal Utility

Profit from producing one more item

Marginal Profit Formula

MP = marginal revenue - marginal costs

Marginal Utility

Extra satisfaction from buying one more of an item

Diminishing Marginal Utility

How satisfaction decreases from repeated use

Entitlements

Gov gives monetary benefits to eligible individuals and gets nothing in return (paid with taxpayer money)

Unemployment Rate

Have to be eligible, looking for a job, and able to work to be counted in unemployment. 4-5% is normal.

GDP

Gross domestic product: value of all finished goods and services

GDP Formula

Consumer Spending + Investment + Government Spending + (Exports - Imports)

Dual Mandate

Manafe inflation and maintain maximum employment rate

What does the Federal Reserve do?

Conducts the nations monetary policy, promotes stability in the financial system supervises and regulates financial institutions

Monetary Policy

The process of adjusting interest rates and the money supply in an effort to influence economic conditions

Federal Open Market Committe

A body within the fed that determines what treatment the economy needs to achieve the dual mandate

Contractionary Policy

Followed when the economy is speeding up and the Fed needs to slow down the economy and take money out of circulation