Econ final exam

Need

Something essential for survival.

Want

Something we desire that is not essential for survival.

Goods

Physical objects that someone produces.

Services

Actions or activities that one person performs for another.

Scarcity

The principle that limited amounts of goods and services are not available to meet unlimited wants.

Economics

The study of how people seek to satisfy their needs and wants by making choices.

Shortage vs Scarcity

Shortages are temporary while scarcity always exists.

Factors of Production

Things needed to make a good or service.

Human Capital

Knowledge and skills sometimes gained through higher education.

Tradeoff

The alternatives that we give up when we choose one course of action over another.

Opportunity Cost

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

Law of Demand

As price increases, demand decreases.

Complements

Items that are paired together; when the price of complements goes down, demand for the main product increases.

Substitutes

Items that can be bought in exchange for another item; when the price of a substitute increases, demand for the original item increases.

Law of Supply

Producers supply more of a good as its price rises and less as its price falls.

Prices

Prices fluctuate depending on the movement of buyers and sellers.;Price correlates with quantity when there is equilibrium

Surplus

When there is more of a good than there is the demand for it;there is a surplus of a good if it is one cent above the equilibrium

Medium of Exchange

A method of payment used in exchange for goods and services.

Barter

Exchange of goods or services without using money.

Unit of Account

A means for comparing values for goods and services.

Store of Value

Money that retains value for future use.

Durability

The ability to withstand wear and tear of being used repeatedly.

Liquidity

How fast an asset can be turned into cash.

Diversification

Spreading out of investments to reduce risk.

Capital Gain

When a stockholder sells an investment for more than they paid.

Capital Loss

When a stockholder sells an investment for less than they paid.

Bear Market

When the stock market falls over time

Bull Market

When the stock market rises over a period of time.

Price Floor

The minimum price set by the government that can be charged for a good or service.

Price Ceiling

The maximum price that can legally be charged for a good or service.

Bitcoin

A cryptocurrency created by Satoshi Nakamoto, known for its volatility and decentralized nature.

Thinking at the margin

the process of deciding how much more or less to do

Land

all natural resources used to produce goods and services 

Labor

Workers, people who make the products

Entrepreneur

Use these things to make money, most entrepreneurs fail or take a long time to turn a profit. 

productions possibility curve

demand

the want and ability of consumers to buy something/ will pay for goods and services

Causes of Demand Curve shifts    

• income 

• Consumer expectations

• Population

• Consumer tastes

Income effect

•  People's income detriment to their demand

• As people's income goes up, they will buy more goods

• normal goods Income up Demand up, Income down Demand Down

• inferior goods Income up Demand down, Income down Demand up

Supply

Supply is seen in the eyes of the producers and is the incentive that as price increases so does supply; Total amount of good/ service at each price point

Causes of the Supply Curve to shift prices can cause the supply curve to shift 

• Left shift-decrease 

• Right shift-increase 

• As input price increases supply decreases

• Causes for supply to shift(determinants)

supply determinants.

• Price of the good or service (law of supply)

• Technology can reduce input cost increasing supply

• The global economy sets the relative price 

• Natural conditions such as weather or natural disasters can slow production

shortage

when there is less of a good than there is the demand for it; If the price is lower than the equilibrium it is a shortage

Money

Anything that a person can use to purchase goods or services. Replaces the need for bartering. 

6 characteristics of money

durability, uniformity, limited supply, divisibility, acceptability, portability

uniformity

People must be able to count and measure money accurately;$1=$1 in every marketplace

limited supply

Money would lose its value if there was an unlimited supply of it so it must be regulated and only have a certain amount

divisibility

Can easily be divided into smaller denomination

acceptability

Everyone in the economy must be able to accept the objects used as money

portability

Easy to carry around with you  

fiat money

money that has value since the gov. says it has value

representative money

exchanged money for something else of value;:Personal checks/ debit card (checking account) / gold/ silver / IOU note/gift cards

commodity money

Any money that his value in of itself

Banking System

a group or network of institutions that provide financial services for us.

How do banks create a profit?

Banks earn profits by lending money at higher interest rates than they pay on deposits/ex. Checking/ saving accounts

Investment

the process of investing your money in an asset with the objective to grow your money in a stipulated time period; Not consuming today in hopes of growth in the future

Diversification

spreading out of investments to reduce risk

Stock

Stocks consist of all the shares by which ownership of a corporation or company is divided. A single share of the stock means fractional ownership of the corporation in proportion to the total number of share; Partial ownership in a firm in hope that the firm will gain money

Share

A portion of a stock

Risks involved with investment

Purchasing stock is risky because the firm selling the stock may encounter economic downturns that force dividends down or reduce the stock’s value. It is considered a riskier investment than bonds.

Dow Jones Industrial average

an index that shows how stocks of 30 companies in various industries have changed in value.

S & P 500

an index that tracks the performance of 500 of the top stocks

Brokerage account

A brokerage account is a type of investment account opened with a brokerage firm. You can deposit money into a brokerage account and the brokerage firm will execute investment orders at your request. Many investors use brokerage accounts to purchase stocks, bonds, mutual funds or exchange-traded funds online 

What gives cryptocurrency its value?

Both scarcity and its demand due to its increasing price are what give cryptocurrency its value.

Supply vs demand

price floor and price ceiling