Key Economic Terms and Concepts

Economics

studies of how a society manages its limited resources

Efficiency

getting the most out of scarce resources

Opportunity Cost

What do you give up to get something else

Interdependence

two or more people, organizations, or countries exchange goods and services with the purpose of fulfilling mutual needs

Equilibrium Price

the quantity demanded by buyers matches the quantity provided by sellers

Specialization

method of production that emphasizes efficiency

Urbanization

cities and manufacturing centers where farmers could sell their produce and buy goods

Surplus

quantity of goods produced outweighs the amount bought by consumers

Shortage

quantity of demand outweighs the amount of good produced

Monopoly

one producer has near-complete control over an industry

Free Rider

people who benefit from public goods/services without contributing

Law of Supply

there is a direct relationship between prices and quantity supplied

Law of Demand

there is an inverse relationship between price and quantity demand

Neolithic period:

Grain was the main exchange unit, labor or goods were paid for in grain or grain products.

Empire of Persia:

First to melt gold loot into state sponsored coins, allowed soldiers to be paid evenly.

Roman Empire:

Created the coin system which included gold, silver, copper, and bronze and was used to commemorate emperors.

Feudal or Middle Ages:

Agricultural estates worked by the serfs and peasants in exchange for protection.

Opportunity cost:

What do you give up to get something else

Incentives:

Benefits of cost of an action that influences people's decisions or behaviors

Comparative Advatages:

two or more people, organizations, or countries exchange goods and services with the purpose of fulfilling mutual needs

Free Markets:

a free market economy system is a system in which production and prices are determined by unrestricted competition between privately owned business

Governments can improve Market Outcomes:

the economic market only works if certain rights are enforced

Free Market:

Individuals/companies make all decisions about production, zero government involvement, relies heavily off supply and demand. Advantage: Freedom for producers

Command:

government makes all economic decisions(price and production). Focused on macroeconomics and social impacts, not profit. Advantage: Avoids inequality and unemployment

Traditional:

relies on customs, history, and beliefs, the tradition guides economic decisions and production/distribution methods. Ex. Inuit tribes in Canada/Alaska

Mixed Market Economy- what is a mixed market economy? And how is the US and China both mixed market economies.

elements of free market and command economies to different degrees(most countries in the world). US: Businesses are consumer driven with some government interference. Only need to follow code, pay taxes, and licensing. China: Businesses are very government driven with minimal freedoms. Government dictate what is to be made

Electrification:

Light bulb patented in 1879, by 1900s factories were electrified. Could run for 24/7 now, production of disposable goods rose, and urbanization of the population.

Great Depression:

ignited by stock market crash in 1929, banks closed fortunes lost. Also goverment assitance to banks and indivuals was started.

World War 2:

War production increased tremendously and helped the economy greatly. By the end of war, we were making loans to other countries and that also led to the 1950s also called the boomer years.

Taste and Preference

What people want/popularity

Number of consumers

Competition amongst people buying goods

Price of related goods

Can I substitute something similar?

Income

How much money consumers are willing to spend

Future expectations

Do consumers predict a change in future prices

Price/Avaliability of resources

How much do materials cost

Number of Sellers

Competition in market

Technololy

How efficient/reliable is the production

Government action

Taxes, subsides

Expectations of future profit

Prediction of how much money to be made