GHS SBCB — V Social Studies: #9

Supply and Demand

At any given price, producers are willing to produce a given amount of a good (the quantity supplied) and consumers are willing to buy a different amount (the quantity demanded), where, as the price rises, firms will be willing to supply more goods, but fewer will be demanded, and as price falls, consumers will demand more goods, but fewer will be supplied; this is represented by a downward sloping demand curve compared to an upward sloping supply curve on a graph

Equilibrium

Represented on a supply-and-demand graph where the two curves intersect, which means that there is an equal amount of supply and demand; economists predict that this quantity will be produced (and consumed) in a free market

Elasticity

A measure of how much one economic variable changes in response to a change in a different variable, expressed in the form of “Every 1% change in the independent (second) variable leads to an x% change in the value of the first (dependent) variable”

Monopoly

Market where there is only one firm producing goods, which allows that firm to set the price higher—and thus make fewer quantities be sold—than would otherwise occur

Oligopoly

A similar market environment to a monopoly where production is dominated by only a few firms

Tariff

A tax placed on the import (common) or export (rarer) of a good which achieves to have various—and often controversial—sociopolitical goals, though they raise consumer prices relative to equilibrium (resulting in a lower quantity demanded); these are similar to quotas, in which a government limits the amount of a good that may be imported.

Factors of production

Land, labor, and capital (i.e., machinery and tools); modern economists sometimes add a fourth: entrepreneurship

Unemployment rate

The percentage of the population that is actively seeking work but cannot find a job, where the cycle could either be cyclical (common in seasonal industries like fieldwork), frictional (the natural time between jobs that exists in most labor markets), or structural (when workers’ skills do not match those required by open jobs)

Gross Domestic Product (or GDP)

A commonly used measure of the size of a country’s or state’s economy, being computed by adding consumption, investment, government expenditures, and exports, and then subtracting imports.

Inflation rate

The pace at which prices are rising, usually expressed in the form “x% per year,” as well as the rate at which currency loses its value; this is often measured by the consumer price index, which establishes a standard basket of goods that a family might buy and seeing how its total price changes over a year

Interest rate

The amount one must pay to use somebody else’s money (“borrow”) for a given period of time, as well as the payment the lender (e.g., a person with a savings account) receives for loaning out money; a savings account earning 5% of this is not acquiring the ability to buy more things if prices are also going up by 5% per year.

Nominal interest rate

The actual amount earned by a lender or saver via a payment

Real interest rate

The amount earned by the lender or spender, corrected by inflation

Comparative advantage

Every pair of potential trading partners (two firms, two neighbors, two countries, etc.) can benefit by trade if they are producing at least two goods; the counterintuitive aspect is that this result is true for every pair, no matter how unproductive one of the parties might be (in absolute terms), so each party should specialize in what it does best (relative to the other party) and then trade for everything else

David Ricardo—

formulated comparative advantage with a famous example involving Britain’s cloth industry and Portugal’s wine industry

Invisible hand

Producers and consumers acting in their own narrow interest (e.g., by trying to maximize income from their business) will create an overall benefit to society; this might happen by their rewarding technologies that make production more efficient, rewarding firms who can sell at lower cost, rewarding inventors who discover new processes, and so on

Ivan Pavlov’s classical conditioning experiments (1901)

Pavlov, who studied the digestive tracts of dogs (winning him the 1904 Nobel Prize in Physiology or Medicine), noticed that his subjects began to salivate as soon as they saw the lab assistant who fed them, which he called “psychic secretion,” so he designed an experiment in which dogs heard the sound of a metronome (commonly misidentified as a bell) and were then presented with food

Stanford prison experiment (1971)

Designed by Philip Zimbardo to study the effects of power dynamics in custodial situations: college students at Stanford University were randomly assigned to be “guards” or “prisoners” for a two-week period, with the guards being instructed to refer to the prisoners only by their number, not their name; although the experience was designed to be structured, by the second day prisoners had begun to rebel against the guards, and guards began to implement sadistic practices designed to degrade, humiliate, and dehumanize inmates

By the end of Pavlov’s experiment—

the neutral stimulus of the metronome became linked to the unconditioned stimulus of food and the unconditioned response of salivation to produce the conditioned response of salivating at the sound of the metronome

By the end of the Stanford prison experiment—

prisoners had begun to rebel against the guards, and guards began to implement sadistic practices designed to degrade, humiliate, and dehumanize inmates; the experiment was stopped after only six days when Christina Maslach, a psychology graduate student, raised ethical objections, and many aspects of the experiment and its legitimacy have now been questioned or disputed by contemporary researchers and experiment participants.

Philip Zimbardo

Psychologist who designed the Stanford prison experiment to study the effects of power dynamics in custodial situations, where later analyzed the experiment in a book which compared the events of the Stanford prison to the abuses at Abu Ghraib