[M&M] Economics of Market Systems

Management & Marketing (Grade 9 ABF): This should cover 99.99% of the material included in the Fourteenth Edition Pearson Business Essentials textbook (plus some additional terminology discussed), particularly from section 1.3 to the end of chapter 1. Used this on Quizlet/Cram for the first test, but it's missing a few tidbits of information. I focused on making this set vocabularic... which might not be the best decision in hindsight, but it effectively reviews most of the material.

demand

willingness and ability of buyers to purchase a good or service

supply

willingness and ability of producers to offer a good or service for sale

law of demand

buyers will purchase (demand) more of a product as its price drops and less of a product as its price increases

law of supply

producers will offer (supply) more of a product for sale as its price rises and less of a product as its price decreases

demand and supply schedule

analytical assessment of the relationships among different levels of demand and supply at different price levels

demand curve

graph showing how many units of a product will be demanded (bought) at different prices

supply curve

graph showing how many units of a product will be supplied (offered for sale) at different prices

market price (equilibrium price)

profit-maximizing price at which the quantity of goods demanded and the quantity of goods supplied are equal

surplus

situation in which quantity supplied exceeds quantity demanded

shortage

situation in which quantity demanded exceeds quantity supplied

private enterprise

economic system that allows individuals to pursue their own interests without undue governmental restriction

private property rights

states that ownership of the resources used to create wealth is in the hands of individuals

freedom of choice

states that one can sell their labor to any employer they choose and can also choose which products to buy; producers can usually choose whom to hire and what to produce

attraction of profits

freedom that leads some people to abandon the security of working for someone else and to assume the risks of entrepreneurship

anticipated profits

estimated profit a business expects to earn from a project, deal, or investment oriented in the future; influence individuals' choices of which goods or services to produce

competition

occurs when multiple businesses vie for the same resources or customers

perfect competition

market or industry characterized by numerous small firms producing an identical product

monopolistic competition

market or industry characterized by numerous buyers and relatively numerous sellers attempting to differentiate their products from those of competitors

oligopoly

market or industry characterized by a handful of generally large sellers with the power to influence the prices of their products

monopoly

market or industry in which there is only one producer that can therefore set the prices of its products

natural monopoly

industry in which one company can most efficiently supply all needed goods and services

economic indicators

statistics that help assess the performance of an economy

business cycle

short-term pattern of economic expansions and contractions

aggregate output

total quantity of goods and services produced by an economic system in a given period; primary measure of growth in the business cycle

standard of living

total quantity and quality of goods and services people can purchase with the currency used in their economic system

gross domestic product (GDP)

total value of all goods and services produced within a given period by a national economy through domestic factors of production

gross national product (GNP)

total value of all goods and services produced by a national economy within a given period regardless of where the factors of production are located geographically

real growth rate

growth rate of GDP adjusted for inflation and changes in the value of the country's currency

GDP per capita

gross domestic product divided by total population; represents average economic output per person

real GDP

GDP adjusted to account for changes in currency values and price changes

nominal GDP

GDP measured in current dollars or with all components valued at current prices

economic growth

increase in aggregate output — depends on output increasing at a faster rate than population; typically followed by increase in output per capita and the system providing more of the products that people want, leading to higher standard of living

purchasing power parity

principle that exchange rates are set so that the prices of similar products in different countries are about the same

exchange rate

value of one currency for the purpose of conversion to another in the global foreign exchange market

interest rate

proportional percentage of a principal amount that is charged additionally as the cost of borrowing money or the reward of saving it

productivity

measure of economic growth that compares how much a system produces with the resources needed to produce it

balance of trade

economic value of all products a company exports minus the economic value of all products it imports

trade deficit

negative balance of trade; value of imports exceeds value of exports

export

good or service produced domestically then sold to a consumer internationally; represents nation's sale of its products and services to the rest of the world

import

purchase of goods or services from a foreign country for sale or use domestically

debtor nation

country that imports more from foreign nations and entities than the values of its own foreign investments

creditor nation

country that exports more to other countries than the country owes to them; result of exporting more goods, services, and capital than it imports

net international investment position (NIIP)

difference between a country's external assets and its external liabilities

austerity measures

policies implemented by governments to reduce government spending, increase taxes, and cut public services in order to address budget deficits or economic crises

antitrust law

collection of federal laws that govern organization of businesses in order to prevent unjustified monopolies; ensure fair competition, lower consumer prices, and higher quality goods and services

national debt

amount of money that a government owes its creditors, accumulated from past borrowing

bond

fixed-income debt instrument (security) where individuals lend money to an entity (corporation or government) who promise to pay back the principal amount at maturity, plus regular interest payments

default

occurs when a borrower fails to make a scheduled payment of principal or interest on a loan, whether it's a mortgage, student loan, or credit card debt

debt ceiling

legal limit on the total amount of money the U.S. government can borrow to pay its existing bills

economic stability

condition in which the amount of money available in an economic system and the quantity of goods and services produced in it are growing at about the same rate

inflation

rate at which the widespread level of prices for goods and services increases throughout an economic system, which causes the purchasing power of currency to fall

demand-pull inflation

occurs when aggregate demand for products outstrips aggregate supply, causing prices to rise; "too much money chasing too few goods"

cost-push inflation

type of inflation where the overall price level rises due to increased production costs

consumer price index (CPI)

monthly statistics index that measures the average prices of typical products purchased by urban consumers, pacing inflation

market basket

representative collection of goods and services with fixed quantities and proportions, used to track the average price level and measure inflation

deflation

broad, sustained decrease in the general price level of goods and services over time

unemployment

level of joblessness among people actively seeking work in an economic system

employed

refers to someone who currently has a job

out of the labor force

someone who does not currently have a job but is not actively looking for one

unemployed

someone who does not have a job now and is actively searching for work

labor force

comprised of all individuals who are either employed or actively seeking employment

unemployment rate

percentage of the labor force that is jobless but actively seeking employment

frictional unemployment

unemployment that occurs when people take time to find a job; short-term and associated with the process of matching workers with occupations

cyclical unemployment

unemployment that rises during economic downturns and falls when the economy improves

structural unemployment

occurs due to a geographic or skill mismatch between workers and employers; workers must either learn new job skills or move to a location where jobs that require their skills are more plentiful

recession

significant and sustained decline in economic activity, characterized by a broad-based drop in aggregate output (indicators like income, employment, and industrial production) which lasts for more than a few months

depression

prolonged period of marginal economic decline, characterized by a substantial drop in GDP, extremely high unemployment, and widespread business failures

fiscal policies

strategic management and adjustment policies for used by a government regarding how it collects and spends revenue

monetary policies

policies by which a central bank manages the money supply and credit conditions to influence the economy

expansionary policy

set of economic measures, enacted through fiscal or monetary means, to boost economic activity during a downturn

contractionary policy

set of economic measures by a government or central bank to slow economic growth and reduce inflation by decreasing the money supply and aggregate demand

stabilization policy

government actions for using monetary and fiscal tools to reduce economic fluctuations, such as those in output, employment, and inflation, and to maintain stable growth

discouraged workers

individuals who are eligible for employment and can work but are currently unemployed and have not attempted to find employment recently, usually because of no suitable employment options or failure to secure a job upon application

subsidy

sum of money granted by the government or a public body to assist an industry or business so that the price of a commodity or service may remain low or competitive