Intro to economics

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Economics

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116 Terms

1
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What is economics?

the study of choices made about money, how and why it is produced, used, and traded by individuals and nations

2
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What are two ways values are produced?

goods and services

3
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What is a good?

items that are grown or manufactured

4
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What is a service?

jobs or chores people do for other people.  (doctor, waiter, plumber)

5
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What are goods and services produced by?

producers

6
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Who buys goods and services?

consumers

7
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What kind of economics focuses on individual desicions?

microeconomics

8
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What kind of economics focuses on whole economies?

macroeconomics

9
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What are the two types of resources that countries use to produce goods?

natural resources and human resources

10
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What kind of resources come from the earth?

natural resources (water, soil, air, trees)

11
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What kind of resources are done by people and their abilites?

human resources (labor, skills, knowledge)

12
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What is an example of a poor country?

Haiti

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What is an example of a wealthy country?

The United States

14
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What is scarcity?

a shortage of or total absence of a resource

15
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What kind of decisions does scarcity force?

trade offs

16
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What economic decision involves giving up one thing to get something else?

trade-off

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What is given up in a trade-off?

opportunity cost

18
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What is defined as something a person accepts as a payment for a good or service?

money or value

19
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What are the three factors that decide the value of a price?

supply, demand, competition

20
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What is the relationship between supply and demand?

when supply decreases, demand increases. when supply increases, demand decreases

21
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What is supply?

the amount of a good or service available to consumers

22
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What is controlled by supply?

producers

23
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What is demand?

the amount of good or service consumers are willing to pay for

24
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What is demand controlled by?

consumers

25
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When will price be the highest?

when the supply of a good or service is low and the demand is high

26
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When will the price be the lowest?

when the supply of the good or service is high and demand is low

27
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When will the price decrease?

when the supply is low and the demand is low

28
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when will the price increase?

when the supply is high and the demand is high

29
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What is the balance between what consumers will pay and what producers charge?

market price or the “equilibrium point”

30
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<p>What is shown on the graph?</p>

What is shown on the graph?

the equilibrium point

31
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What is inelasticity?

the demand stays constant even though the price changes

32
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What products exist for inelastic demand?

medicines and medical care

33
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What are the effects of a shortage?

causes prices to rise

34
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What are the effects of a surplus (overabundance)?

causes prices to fall

35
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What do changes in price effect?

demand for complimentary items and substitute items

36
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What are examples of complementary items?

sugar for tea and coffee

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What is an example of a substitute item?

tea and coffee

38
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What is does it mean when the supply curve shifts?

there is an increase or decrease in a number of sellers, or a technological breakthrough

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What does it mean when the demand curve shifts?

increase in income, change in the number of buyers, or changes in prices of related goods

40
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Why do producers sell a product at the least possible price?

to make a pre-determined profit and sell the most of that product

41
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<p>What curve is this?</p>

What curve is this?

demand curve

42
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What does the demand curve represent?

consumer demand

43
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<p>What curve is this?</p>

What curve is this?

supply curve

44
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What does the supply curve represent?

amount supplied by a producer

45
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What is competition'?

the rivalry between producers of a good or service

46
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What are the effects of competition?

it forces producers to produce high quality products at a lower price

47
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How is competition good for consumers?

most sellers use competitive pricing which helps consumers afford goods or services

48
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What are the four factors of a good or service?

capital/capital goods, natural resources, labor, management

49
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What are the machines, tools, and buildings used to produce goods/services?

capital goods

50
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What is automation?

the act of implementing equipment with advanced technology

51
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What do companies evaluate by measuring productivity?

output

52
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What is productivity?

a measure of output from a production process

53
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High productivity =

high output

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high output =

more productivity for producers

55
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What is used to supervise and plan production?

management

56
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What is the law of diminishing returns?

at some point, the amount of extra output created by an increase in production begins to decrease

57
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Who owns a business?

entreprenuers

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What do entrepreneurs do?

risk their own money in hopes of receiving more money

59
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What is the money remaining for a business after it has paid all of its bills and taxes?

profit

60
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What is the total amount of money a business makes before it pays its bills and taxes?

gross income

61
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True or false: profit is always lower than gross income

true

62
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What is the selling of a good or service, from creating through final sale?

marketing

63
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What does marketing include?

packaging, distribution, placement, advertising

64
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What is one of the highest expenses when producing a good or service?

marketing is one of the most expensive

65
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What part of marketing involves wholesalers and retailers

distribution

66
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What are the business that buy goods directly from producers to store in a warehouse?

wholesalers

67
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What are the stores that consumers buy products from?

retailers

68
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What are the four functions of money?

medium of exchange, measure of value, standard of deferred payment, store of value

69
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What does medium of exchange mean?

money is value used to buy goods and services

70
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What does measure of value mean?

money defined by how much something is worth

71
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What does standard of deferred payment mean?

money can be a credit that allows you to buy now and pay later

72
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What does store of value mean?

money can be saved up and stored until needed

73
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What is an economic system?

a system of production, resource allocation, and distribution of goods and services within a society

74
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What are the four types of economic systems?

command economy, traditional economy, socialist economy, market economy

75
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What is a command economy?

the government is the primary decision maker and controls production, found in communist countries

76
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What are the advantages and disadvantages of a command economy?

advantages: low prices for consumers, everyone has a job

disadvantages: no competition means low quality goods

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What is a traditional economy?

decisions are based upon tradition and tradition answers basic economic questions, commonly found in third world countries, no technology

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What are the advantages and disadvantages of a traditional economy?

advantages: sense of community, lack of greed/crime

disadvantages: lacks modern technology, lack ability to handle obstacles

79
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What are labor-intensive economies?

depend on the usage of workers to produce a good or service because they lack money to purchase machines, prone to error, more costly

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What are capital-intensive economies?

use machines and technology to produce goods and services faster, better, and more profitably

81
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What is a socialist economy?

economic system where the government owns the nation’s major industries, and individuals own smaller businesses, common in europe

82
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What are the advantages and disadvantages of socialist economies?

advantages: stability among important national industries, lower price

disadvantages: options for going into business are limited, very high tax

83
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What is a market economy?

economic system where economic decisions are determined by individual buyers and sellers, and the means of production are controlled by individuals, often called capitalism. there are government controls called taxes and regulations

84
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What are the advantages and disadvantages of market economies?

advantages: high quality products at lowest possible price, opportunity to determine one’s worth and pursue a profit

disadvantages: little protection from high prices, no guarantee of employment for workers

85
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What is a free enterprise system according to the United States?

people have the freedom to own property, people have the freedom to compete with others in business, people have the freedom to go into business and make a profit, people have the freedom to buy the best products at a low price

86
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True or false: some countries are 100% communist, traditional, social, or capitalist

false

87
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What does the US have for workers that most countries dont?

minimum wage

88
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What is minimum wage in the US?

$7.25 per hour

89
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What is the average wage in the US?

$17 per hour

90
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What is the average wage in china and mexico?

$2.50 per hour

91
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True or False: companies earn more profits by paying workers less in other countries

true

92
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How did the US government attempt protect American businesses?

by placing a tariff/tax on imports from other countries

93
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What is the NAFTA agreement?

North American Free Trade Agreement, gradually eliminated tariffs and trade barriers on products

94
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What is the CAFTA agreement?

Central American Free Trade Agreement, a regional agreement between the US and five central American countries: Guatemala, El Salvador, Honduras, Nicaragua, and Costa Rica

95
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What are the three business organizations producers choose from when establishing a business?

single/sole proprietorship, partnership, corporation

96
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What us a sole proprietorship?

a business owned/operated by one person- the proprietor, 75% of businesses in the US

97
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What are the advantages and disadvantages of a sole proprietorship?

advantages: owner sets up own hours, owner receives all profits

disadvantages: owner works long hours, owner has great personal financial risk

98
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What is a partnership?

a business owned by two or more people, often used by doctors and attorneys, 7% of business in the US

99
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What are the advantages and disadvantages of a partnership?

advantages: more capital to start business, workload is shared

disadvantages: disagreements among partners, financial risks

100
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What are sole proprietorships and partnership mainly considred?

small businesses