intro tl biz midterm

Elastic Demand

when a small price change causes a big demand change.

Inelastic demand

when a price change causes little to no change in demand

Unit elastic demand

when the percentage of the change in price = the change in demand

Perfectly Inelastic Demand

when the demand for a good stays the same no matter the price

Factors of Production

Land, Labor, Capital and Enterprise

Land

All natural resources. including raw materials, minerals, water oil and the physical space for production

Labor

The human effort, skills, and time people contribute to production, both physical and intellectual work.

Capital

Manufactured goods used to make other goods and services such as tools, machinery and infrastructure.

Enterprise or Entrepreneurship

the seeking out of profitable opportunities for production and taking risks in attempting to exploit these

MP =

Marginal product:

L =

labor: the physical and mental efforts of workers

TP

total product

delta (triangle)

change

MP = (triangle)TP / L

marginal product = the change in total output divided by change in number of workers

Economics

Study of how people make choices to satisfy unlimited wants with limited resources

Scarcity

Limited resources force people to make choices

Trade-off

Giving up one thing to get another

Opportunity Cost

The next best alternative you give up when making a choice

Supply

Amount producers are willing and able to sell at each price

Demand

Amount consumers are willing and able to buy at each price

Supply Curve

Shows relationship between price and quantity supplied (upward sloping)

Demand Curve

Shows relationship between price and quantity demanded (downward sloping)

Equilibrium

Where quantity supplied equals quantity demanded

Ceteris Paribus

All other things equal

Price Ceiling

Maximum legal price set by government (causes shortages)

Price Floor

Minimum legal price set by government (causes surpluses)

Price Elasticity of Demand

How responsive quantity demanded is to a change in price

Entrepreneurship

Risk-taking ability to start a business

Short Run

Time period where at least one input is fixed

Long Run

Time period where all inputs can change

Marginal Product

Extra output from adding one more worker (MP = ∆TP ÷ ∆L)

Perfect Competition

Many firms selling identical products with no long-run profits

Monopoly

Market with one seller and high barriers to entry

Natural Monopoly

One firm can supply market at lower cost than many firms

Allocative Efficiency

Occurs when price equals marginal cost (P = MC)

Game Theory

Study of decision-making when outcomes depend on others

Prisoner's Dilemma

Self-interest leads to worse outcome for everyone

Comparative Advantage

Ability to produce at lower opportunity cost

Protectionism

Government actions to protect domestic industries

Economic Union

Group of countries that trade freely

Globalization

Increasing economic connection between countries

GDP per Capita

GDP divided by population; measures standard of living

Low-Income Country

Per capita income below $1,025 ex: south sudan

Middle-Income Country

Per capita income between $1,025 and $12,475 ex: china

High-Income Country

Per capita income above $12,475 ex: Japan, United States or UAE

Purchasing Power Parity

Compares what money can buy in different countries

Economic Growth

Increase in ability to produce goods and services

Business Cycle

Prosperity(peak), Recession, Depression, Recovery

Expansion

Period of economic growth

Deficit Spending

Government spends more than it earns to boost economy

Bull Market

Stock prices rising

Downsizing

Reducing workforce to cut costs

Dot-Com Boom

Rapid growth of internet companies in the 1990s

Prosperity in the business cycle

the peak. A period where most people who want to work are working, business produce goods in record numbers and wages are good as GDP increases

Recession in the business cycle

The phase of the business cycle in which demand begins to increase, business lower production, unemployment rises and GDP growth slows

Depression in the business cycle

The phase of the business cycle that is marked by a prolonged period of high unemployment, weak consumer sales and business failures

Recovery in the business cycle

The phase in the business cycle in which employment begins to increase, demand for goods and services increase and GDP begins to rise again

GDP (gross domestic product)

Measures the total value of goods and services produced by that economy during a specific time period