econ final exam

study guide

What is scarcity?

a shortage of something

what determines economic choices

more resources \= more options

natural resources

Materials from the earth that people use to meet their needs

labor

Human effort directed toward producing goods and services

capital

anything with value to the owner

Traditional Economy

economic system that relies on habit, custom, or ritual to decide questions of production and consumption of goods and services

market economy

economic system in which decisions are made based on supply and demand

command economy

An economic system in which the government controls a country's economy.

mixed economy

an economic system combining private and public enterprise.

Why are trade-offs important?

because to have more of one thing, you have to accept having less of another

What is opportunity cost?

the most desirable alternative given up as the result of a decision

How do cost and revenue influence economic decision making?

The cost of something may change the amount of it, which would affect the price

marginal cost

Extra cost of producing one additional unit of production.

marginal revenue

the additional income from selling one more unit of a good; sometimes equal to price

fixed costs

Costs that do not vary with the quantity of output produced

variable costs

costs that vary with the quantity of output produced

How do supply and demand affect prices?

When the supply of a good or service is higher than the demand, the price goes down. When the demand for a good or service is higher than the supply, the price goes up.

how do we find the equilibrium price

the equilibrium price is the intercepting (X) point between supply and demand.

what factors affect supply

Price, availability of construction, availability of labor, materials,

Government controls, and financial policies

what factors affect demand

Population, demographics, employment and wage levels.

what is a shortage

A situation in which quantity demanded is greater than quantity supplied

surplus

A situation in which quantity supplied is greater than quantity demanded

how do prices help consumers and businesses make economic decisions

prices help determine the value of goods and services, so people can decide if it's worth buying.

Familiarize yourself with supply and demand curve shift graph

What is Gross Domestic Product (GDP)?

the market value of all final goods and services produced within a country in a given period of time

Why is GDP important to a nation

making goods and providing services create income for people in the economy

Why is GDP difficult to measure?

so many goods and services are produced during a year, and it leaves out parts.

what is the difference between intermediate and final goods

final goods do not require further processing. Intermediate goods are used by businesses in producing goods and services

why do we not consider intermediate goods when calculating gdp

they are only components of final goods

what types of goods and services dont get counted in gdp

Unpaid work/volunteer, homegrown items, black-market activites

What is GDP per capita?

GDP of a country divided by the population in an area

Why is GDP per capita a better measure than GDP when comparing the economic activity of countries?

it's a better indicator because it targets specific areas, and removes effects of inflation and price increases.

What are the four factors of production?

land, labor, capital, entrepreneurship

how are entrepreneurs a fourth factor of production

entrepreneurs are a factor because they use the other three factors to produce goods and services.

Why do resources, goods and services flow in a circular pattern in a market system?

this is because it's a constant flow/loop from consumers to producers.

what happens to gdp when the economy is growing

gdp increases when the economy does well, and vice versa

how can nations create and promote economic growth

consumer spending and business investment boost economic growth.

Productivity

the efficiency of the production of goods and services.

Specilization

Devolopment of skills in a specific kind of work

division of labor

Division of work into a number of separate tasks to be performed by different workers

human capital

the skills and knowledge gained by a worker through education and experience

What makes capitalism work?

markets, economic freedom, private property rights, competition, profit motive, voluntary exchange. also provides a motive to make profit

Six features of a free enterprise system

economic freedom, voluntary (willing) exchange, private property rights, profit motive, competition, and specilization

how is the history of capitalism associated with the founders

it comes from feudalism and mercantilism

Laissez-faire economics

economic system where government should not interfere in the marketplace

What is profit motive?

The desire to work hard and be creative to earn a higher profit.

familiarize yourself with a circular flow model

what is the federal trade commission

an organization that works to prevent fraud and unfair business practices

what rights do you have as a consumer

-right to information

-right to consumer protection by government agencies

-right to complain

what president proposed the consumer bill of rights

John F. Kennedy (JFK)

what responsibilities do you have as a consumer

staying informed, reading and following instructions, using products and services properly, speaking out against wrongdoing and lawfully purchasing goods and services.

what steps can you take to be a successful consumer

not overspending, utilizing a budget, not using a credit cart for everything

how can making a budget lead to financial responsibility

it helps us be more aware of our savings and checking account balances when we spend money.

what is credit

the ability of a customer to obtain goods or services before payment, based on the trust that payment will be made in the future.

why is it important to use credit responsibly

it's hard to make important purchases with bad credit/debt (pay the credit back on time)

why is it important to save part of your income

to have more money in the future

What types of saving plans exist?

trust funds, saving accounts, bonds

what are stocks, bonds, and mutual funds

investments

how do investments in stocks and bonds promote long-term financial goals

the longer you hold them, the fewer fees you have to pay. also, having savings provides you more money long-term

disadvantages of a sole proprietorship

all liability, hard to get financial capital, have trouble hiring skilled workers

Advantages of Sole Proprietorship

your own boss/hours, all profit

cooperation advantages

easy to raise financial capital, ownership is easily transferred, limited liability, investors protected from losing their personal property if something goes bad.

cooperation disadvantages

more regulated, hard for stock holders to unite and get change if they don't like something

what is the role of organized labor in the us economy/what is a labor union

to improve conditions for workers, and wages

How do labor and management work out agreements?

They use collective bargaining, outside help, strikes, lockouts, etc.

mediation

A method of settling disputes outside of court by using the services of a neutral third party, called a mediator. The mediator acts as a communicating agent between the parties and suggests ways in which the parties can resolve their dispute.

strike

Nonviolent refusal to continue to work until a problem is resolved.

picketing

Patrolling of a business site by workers who are on strike

lockout

When management closes the doors to the place of work and keeps the workers from entering until an agreement is reached

how do businesses help their communities

sponsorship, donations, foundations, etc.

how do businesses carry out their responsibilities to their consumers, owners, and employees

sell safe products that work properly, reliable services, fair treatment, release financial reports to stockholders, transparency, benefits/services to workers, not discriminating

public good

a good many people in a community can use (sidewalk, parks, roads, libraries)

private good

something bought by someone/only they use (clothing, food, books)

what goods does the government provide

public goods

externalities

A side effect of an action that affects a third party other than the buyer or seller.

monopoly

A market in which there are many buyers but only one seller.

natural monopoly

a type of monopoly that arises because a single firm can supply a good or service to an entire market at a lower cost than could two or more firms

how does the government increase or discourage competition among businesses

the government increases competition by further enforcing antitrust laws. they decrease competition by limiting businesses/adding laws

how does the government regulate businesses

taxing them

what does the fda (food and drug administration) do

makes sure products are safe to be sold to consumers and are correctly labled. they mainly check food, medications, and cosmetics

what does the cpsc (consumer product safety comission) do

ensures that the consumers won't have any risk of injury from products

what does the cdc (center for disease control) do

distributes vaccines, and does it's best to keep diseases from spreading too much

why is it important to measure an economy's performance

so that you can pedict what will happen nect to the economy, and what precautions to take to keep success

what is significant about real gdp

it gives us some information about how the economy is doing

unemployment rate

measurement of the number of people that could have jobs, but don't

what are other signs of an economy's health

unemployment and inflation

how is the stock market a measure of the economy's performance

it relates to gdp, which is a huge indicator of economic performance

what factors influence income

education, family wealth, and discrimination

how does the government help those in poverty

implemented programs like temporary assitance for needy families (TANF). they give out welfare and work.

recession

A slowdown in a nation's economy

depression

A long-term economic state characterized by unemployment and low prices and low levels of trade and investment

bear economy

prolonged drop in investment prices — generally, a bear market happens when a broad market index falls by 20% or more from its most recent high.

bull economy

financial market condition where prices are rising or are expected to rise. It's typically associated with a sustained increase of 20% or more in securities prices,

why do bear markets and recession go together

bear markets are when investors don't invest as much because of uncertainty. this goes with recessions because when people don't invest, the economy slows.

familiarize yourself with the parts of the business cycle

what was significant about the civil rights act of 1964 in relation to economics

it banned discrimination on race, gender, religion, or national origin. this meant more people in the workplace.

barter

Exchange goods/services without involving money.