Econ Terms Unit 2.

Law of supply

P goes up, the QS goes up

P goes down, the QS goes down

farmers don’t follow this

Law of variable proportions

Output will change as one input is varied while the others are held constant

Inputs affect outputs

Input costs

Costs go up, supply decreases if it hurts profit

Costs go down (efficiency), supply if it helps profit

Government Policies

Subsidies, excise taxes, and regulation

Principle of Diminishing Marginal Utility

As consumption increases, the marginal utility derived from each additional unit declines.

Change in Global Economy

Stress on imports

Natural disasters

Future expectations

Change in number of suppliers

Location

Proximity to raw materials, labor pool, etc

Law of Diminishing Returns

As we consume more of an item, the amount of satisfaction produced by each additional unit of that good declines

Structure

Shareholders (owners)

Board of directors (hire/fire the CEO)

CEO (president)

VP

Department heads (managers)

Employees

Entrepreneurship

An individual that assumes their risk of small businesses.

Small business

Independently owned

Annual sales less than 7.5 mil

Fewer than 500 employees

Sole Propietorship

You are the only “owner” of the business

You get all the money

You’re your own boss

Partnership

More than one person owns the business

Less work

Less risk

Corporations

May be private or publically owned

Many shareholders

Government charter

Perfect Competition

Products are identical

Buyers have some info.

NOT in capitalism

Monopolistic Competition

Many sellers, small differences, oligopoly

Small number of companies that control the market

Primary Goal for Corporations

PROFIT

How do Corporations Maximize Profits?

Advertise

Innovate

Lower expenses

Raise prices

Find new markets

Create a monopoly?

Merging

A company buying out another business

Horizontal Merger

Two or more companies involved in the same business

Vertical Merger

Two or more companies involved in different steps of the same production process

Conglomerate Merger

Two or more unrelated businesses

Productivity

The quality and or the effectiveness of producing good or service

Fixed costs

Costs that stay constant (EX: Rent, Salary)

White collar jobs

Professional jobs (EX: Teacher, Business, Office jobs)

Blue Collar Jobs

More labor intensive jobs (EX: Construction, Miners, Farmers)

Variable Costs

Prices change (EX: Utility bills, wages)

How do businesses become productive?

Quality of Labor force

Quality of Equipment

Efficiency Strategies

Knowing the Economic Climate

Components of having a business plan

Financing sections

Product/Services

Marketing Section

Women in the Labor

In 1920, 72 percent of the workforce was men and 28 percent were women

Today, 54 percent is men and 46 percent is women

Today, 55 percent of all college degrees are earned by women

Teens in the Workforce

In 1950, 22 percent of high school seniors held a part-time job

Today, it is 60 percent

Shifts in Labor Equilibrium

Shortages

Tech advances

Shifts in Public Attitudes

Elastic Demand

The change in quantity demanded due to a change in price is large

Inelastic Demand

When the price of a good or service goes up, consumers' buying habits stay about the same, and when the price goes down, consumers' buying habits also remain unchanged.

Law of variable proportions

Inputs effect outputs

Input Costs

Costs go up, supple decreases if It hurts profit.

Substitute goods

EX: if the price of a substitute good (say, coffee) increases, then demand for the given commodity (say, tea) will increase as compared to coffee

Complimentry Goods

When the price of one good increases, the demand for the other good decreases.

Causes of Change in Demand

Change in weather

Change in income

Change in style

Future expectations

Population

Demographics

Causes of change in supply

New technologies, such as more efficient or less expensive production processes, or a change in the number of competitors in the market.

Equillibrium Point

When supply meets demand. They balance each other.

“Market Clears Itself”

Where supply perfectly matches demand, leaving no surplus or shortage

Surplus

The amount of an asset or resource that exceeds the portion that's actively utilized.

Shortage

The quantity of a product or service demanded is greater than the quantity supplied at the market price

Oligopoly

A state of limited competition, in which a market is shared by a small number of producers or sellers.

Monopoly

One business runs the whole market

Variable Costs

Costs that change as the volume changes

Business Plan

A business plan is a formal written document outlining business goals, strategies, financial forecasts, and operational details. It serves as a roadmap for entrepreneurs to guide their business decisions and attract investors or lenders.`