Economics Final Exam Diagram | Quizlet

Need

Something essential to survival that humans cannot live without; food, shelter, water, etc.

Sole proprietorship

One person owns a business independently. He or she is responsible for all debts, liabilities, and profits.

TERM

Product market

DEFINITION

Where consumer goods are bought and sold

Shares

Companies issue these, a piece of ownership in the company, to raise money for new projects

Law of Supply

As price increases, firms are willing to produce more, and more firms are willing to enter the market

Want

A good or service that is desirable, but not necessary

TERM

Factor market

DEFINITION

Where factors of production (land, labor, capital) are bought and sold

Law of Demand

As price increases, consumers buy less. As price decreases, consumers buy more.

Diversification

Investing in a wide variety of different stocks, bonds, funds, etc. "Not putting all of your eggs in one basket"

Liability

Being legally responsible for something; in this case, usually debt.

Fringe Benefits

Any payments to a worker other than salary or wages; health insurance, vacation time, etc.

Dividends

Quarterly payments to shareholders based on profits

Demand Curve

Downward sloping curve; Inverse relationship with price

TERM

Businesses

DEFINITION

firms that provide a good or service to consumers, purchase factors of production

Microeconomics

Field of economics that focuses on individuals and firms

Macroeconomics

Field of economics that focuses on society as a whole

TERM

Households

DEFINITION

Sell factors of production, use the wages/income to buy goods and services

Demand Schedule

Price and Quantity Demanded (QD) shown in a chart

Capital

Financial assets or the financial value of assets

Franchise

A business given the license to operate by a parent company. Commonly fast food companies.

Corporation

A company regarded as a separate legal entity; has a board of directors and may publicly sell shares of ownership

Capital Gains

The positive difference between the purchase price of a stock and its sale price.

Supply Curve

Upward sloping curve; Direct Relationship with price

Privatization

Business, firms, or property owned by individuals instead of the government

Scarcity

Limited resources or money that cannot meet unlimited wants

Entrepreneurs

People who come up with new ideas or improve upon existing goods and services

Market

A place or situation where goods and services can be exchanged

Supply Schedule

Price and Quantity Supplied (QS) shown in a chart

Capital Loss

The negative difference between the purchase price of a stock and its sale price.

Vertical Merger

Two companies at different stages of a supply chain or that make different products that join together; AT&T and DirecTV

Factors of production (name the 3)

Land, Labor, Capitial

Efficiency

Maximization of resources and factors of production

income Stock

Stock that provides regular payment in the form of dividends

Horizontal Merger

Two companies in direct competition that join together; Bass Pro Shops and Cabela's

Equilibrium Point

Quantity demanded=Quantity supplied; perfect balance

Land

The natural resources that exist in a given space

Karl Marx

Founder of communism

Quantity Supplied

The amount of a good that a firm is willing to sell at a given price

Stock Broker

One who buys and sells stocks on behalf of clients

Conglomerate

Companies that own a wide variety of brands in different markets; Johnson & Johnson, Unilever, Proctor & Gamble, etc.

Barriers to entry

Factors such as laws, regulations, or startup costs, that prevent new businesses from joining an industry

Brokerage Firms

A financial institution that facilitates the buying and selling of financial securities

Quantity Demanded

The amount of a good that consumers want to buy at a given price

Labor

The effort people devote to tasks for which they are paid

Firm

A business or organization that sells a good or service

physical capital

Any human made resource that is used to produce other goods or services

Economic System

The characterization of how a country distributes goods and services

Shifters of Demand

Substitution effect, income effect, tastes and preferences, etc.

Financial Asset

Any stock, bond, investment, etc. that holds monetary value

Startup costs

The initial expenses involved with starting a business/company

Imperfect Competition

A monopolistic company or other factors are able to control prices in the market

Interest

The extra payment made to a lender for the service of borrowing money over a period of time

Shifters of Supply

Input costs, Technology, Regulations/Taxes, etc.

Human Capital

A worker's knowledge or skills gained through education

Laissez Faire

A hands off approach to regulation from government

Trade-off

Giving up one benefit in order to gain another

Entrepreneur

An innovator or inventor who sells new ideas, goods, or services by combining the factors of production

Elasticity of Demand

How sensitive consumers are to a change in price

Bull Market

A period of general economic prosperity; good time to buy

Perfect Competition

Prices and equilibrium are completely dictated by market forces, and fair for both consumers and producers

Bear Market

A period of general economic shrinkage; could be a good time to sell

Monopoly

One company is in complete control of an industry, and has the power to control prices and output

Inelastic

Price doesn't affect QD much; Coefficient less than 1

Opportunity cost

The next most desirable alternative someone gives up when making a decision

Centrally planned

An economy where all decisions are made by the government

Cost/Benefit Analysis

Weighing the pros and cons of a decision in order to come to a conclusion

Security

The idea that goods will be authentic, wages will arrive on time, and safety nets that are put in place in the event of a natural disaster

Unit Elastic

Price affects QD proportionately; Coefficient is exactly 1

Credit

The ability/trust from a bank to buy something now and pay for it later

Natural Monopoly

A monopoly that exists because of extremely high startup costs; Not seen as negative to consumers because it is actually more efficient that pure competition would be in the same market.

Interest Rate

The percentage fee charged by a bank for the service of borrowing money, paid by the consumer.

Price Discrimination

Differentiating the price of a good or service based on a factor such as age, status, time, etc.

Elastic

Price affects QD greatly; Coefficient is greater than 1

Adam Smith

Founder of free-market enterprise system

Production Possibility Curve

Imaginary graph that helps economists decide what should be produced

Inefficient Output

Any point inside of the PPC

Private Property

Ownership of land or other goods by private citizens

Elasticity Formula

Percent change in quantity over percent change in price

Minimum Payment

The lowest possible payment one can make on a loan or credit card debt.

Monopolistic Competition

Market structure in which many firms sell products that are similar to each other, but different enough to influence consumers' decisions. (Style, Material, Quality, etc.)

Efficient Output

Any point along the PPC

Growth

Increase in the size and power of an economy

Credit Balance

Any unpaid credit debt that carries over to the following month

Non-Price Competition

Firms competing by doing anything other than lowering their prices; advertising, location, service, etc.

APR

Annual Percentage Rate. Divide this by 12 to find the monthly interest payment on a credit card.

Oligopoly

A few (3-5) major companies control 75-80% or more of the production and sales in an industry

Impossible or unsustainable output

Any point outside of the PPC

Shortage

Quantity demanded is greater than quantity supplied

Freedom

One's ability to make financial choices for his or her self, rather than relying on government

Efficiency

The use of resources in a way that maximizes output

Free-market

An economic system free from government control

Surplus

Quantity demanded is less than quantity supplied

52 Week Range

The highest and lowest price a stock has reached in the last year

Collusion

Multiple firms in an oligopoly working together to control prices

Price Leader

The firm that sets prices and outputs for the rest of the industry

Volume

The number of shares of stock traded in a day

Price Ceiling

A maximum price that can legally be charged for a good- placed below the current equilibrium

Socialism

A system that involves equality among all members, where wealth is redistributed amongst citizens

Underutilization

Production of fewer goods or services than an economy is capable of

Mixed

A system that blends free-market principles with government regulation