Economics Final Exam Review Vocabulary

Economics Final Exam Review Flashcards

Scarcity

An economic principle based on the fact that we live in a world where there are limited resources. Something that is scarce is something that we are short on and is needed.

Factors of Production

Land, Labor, Capital, Entrepreneurship. Resources used to produce goods and services.

Land (Factor of Production)

The physical land where production is happening, whether it be agricultural land or commercial real estate.

Labor (Factor of Production)

The effort expended by an individual to bring a product or service to the market.

Capital (Factor of Production)

Skills and abilities (human capital). Equipment/Investment used to contribute to the economy's market.

Entrepreneurship (Factor of Production)

Combines the other three factors and puts in place the most efficient production system to produce the best output.

Opportunity Cost

The value of the next best alternative forgone (given up) when making a choice.

Traditional Economy

An economic system based on customs and traditions where economic decisions are determined by long-standing practices and cultural norms, often involving subsistence farming and barter systems.

Command Economy

An economic system where the government or central authority has significant control over the allocation of resources, production, and distribution of goods and services.

Market Economy

An economic system that operates on the principles of supply and demand, where economic decisions are decentralized, and individuals and businesses make choices based on their self-interest.

Mixed Economy

An economic system that combines elements of both market and command systems, with a blend of private and public ownership.

Production Possibilities Curve

A graph that shows the maximum possible output combinations of two goods or services an economy can achieve when all resources are fully and efficiently employed.

Efficient Use of Resources (on PPC)

Producing on the production possibilities curve.

Inefficient Use of Resources (inside PPC)

Producing inside the production possibilities curve.

Impossible Production (outside PPC)

Producing outside the production possibilities curve, as it requires more resources than are available.

Supply and Demand Curves

Graphs that show the relationship between the price of a product or service and the quantity demanded or supplied.

Increase in Demand

The demand curve shifts to the right, leading to a higher equilibrium price and quantity.

Decrease in Demand

The demand curve shifts to the left, resulting in a lower equilibrium price and quantity.

Increase in Supply

The supply curve shifts to the right, leading to a lower equilibrium price and a higher equilibrium quantity.

Decrease in Supply

The supply curve shifts to the left, resulting in a higher equilibrium price and a lower equilibrium quantity.

Sole Proprietorship

A business structure where a single person owns and operates the business, having full control and assuming all liabilities.

Partnership

A business structure where two or more individuals share ownership, responsibilities, and profits of the business.

Corporation

A legal entity that exists separately from its owners (shareholders), with its own rights, liabilities, and responsibilities.

Perfect Competition

A market structure defined by a large number of buyers and sellers, identical products, perfect information, easy entry and exit.

Monopolistic Competition

A market structure with a large number of sellers offering differentiated products, allowing for some control over pricing.

Oligopoly

A market structure controlled by a few large firms that manage a significant portion of the market.

Monopoly

A market structure where there is a single seller or producer of a good or service with no close substitutes.

Consumption (GDP)

Expenditure by individuals, households, or businesses on goods and services to satisfy their immediate needs and wants.

Investment (GDP)

Spending on capital goods, like machinery, equipment, and buildings, aimed at increasing future production and generating income.

Government Spending (GDP)

Expenditures made by the government on goods, services, and public programs.

Net Exports (GDP)

The difference between a country's exports and imports.

Frictional Unemployment

Temporary unemployment that occurs when individuals are between jobs or searching for new employment opportunities.

Seasonal Unemployment

Unemployment that happens when individuals are unemployed due to changes in the demand for labor during specific seasons or time periods.

Structural Unemployment

Unemployment that arises from a mismatch between the skills or qualifications of workers and the available job opportunities.

Cyclical Unemployment

Unemployment caused by downturns in the business cycle, typically associated with a decline in overall economic activity.

Peak (Business Cycle)

The highest point of economic activity in the business cycle.

Expansion (Business Cycle)

A period of economic recovery and growth characterized by less unemployment, increased real GDP, and increasing interest rates.

Contraction (Business Cycle)

A period of economic decline marked by more unemployment, decreased real GDP, and reduced job growth.

Trough (Business Cycle)

The lowest point of economic activity in the business cycle.

Recession

Six months of economic contraction.

Expansionary Fiscal Policy

Increasing government spending and/or reducing taxes to stimulate economic activity.

Contractionary Fiscal Policy

Reducing government spending and/or increasing taxes to control inflation.

Expansionary Monetary Policy

Increasing the money supply, lowering interest rates, and encouraging borrowing and investment to stimulate economic activity.

Contractionary Monetary Policy

Reducing the money supply, raising interest rates, and discouraging borrowing and spending to control inflation.

Absolute Advantage

The ability to produce more of a good or service than another producer using the same amount of resources.

Comparative Advantage

The ability to produce a good or service at a lower opportunity cost than others.

Tariffs

Taxes imposed on imported goods.

Embargoes

Complete bans or restrictions on trade with a specific country.

Subsidies

Financial assistance provided by the government to domestic producers.

Standards/Regulations

Requirements imposed on imported goods to ensure compliance with specific safety, quality, or environmental standards.

Quotas

Limits set on the quantity of a specific good that can be imported or exported.

Exchange Rate

The price of one country's currency in relation to another country's currency.

Commercial Banks

Financial institutions that provide a wide range of banking services to individuals and businesses.

Credit Unions

Member-owned financial cooperatives that offer similar services as commercial banks.

Payday Lenders

Financial institutions that provide short-term, high-interest loans to individuals.

Title Pawn Lenders

Financial institutions that provide loans to individuals by using their vehicle's title as collateral.

Progressive Tax

A tax system where the tax rate increases as the taxpayer's income rises.

Regressive Tax

A tax system where the tax rate decreases as the taxpayer's income increases.

Proportional Tax

A tax system where the tax rate remains constant regardless of the taxpayer's income level.

Car Insurance

Coverage that protects against financial loss due to damage or theft of a vehicle.

Health Insurance

Coverage that helps individuals manage the costs of medical expenses.

Life Insurance

A contract where the insurer agrees to pay a death benefit to the beneficiaries upon the policyholder's death.

Disability Insurance

Offers income protection in the event of a disabling illness or injury.

Property Insurance

Coverage that protects against financial loss or damage to property.