Economics Midterm Review

Economics

• Def: Study of how people use limited resources to meet needs/wants

• Ideas: scarcity, choices, decision-making

Economy

System for producing and distributing goods/services

Macroeconomics

• Def: Study of the whole economy

• Ideas: inflation, unemployment, GDP

Microeconomics

• Def: Study of individual consumers & firms

• Ideas: supply/demand, pricing

Resource

Factors of production

• Def: Inputs used to produce goods/services

• Ideas: land, labor, capital, entrepreneurship

Scarcity

• Def: Limited resources, unlimited wants

• Ideas: forces choices

Trade off

Giving up one thing to get another

Opportunity cost

• Def: Value of next best alternative

• Ideas: what you give up

Production Possibilites Curve (PPC)

• Def: Graph showing max production combinations

• Ideas: efficiency, trade-offs, opportunity cost

Production Possibilities Frontier (PPF)

the curve itself

points ON = efficient, inside = inefficient

Capitilism

• Def: Private ownership, profit-driven

• Ideas: free market, competition

Command Economy

• Def: Government controls economy

• Ideas: no consumer choice

• ex. north korea / cuba

Communism

• Def: No private property, gov owns all

• Ideas: equality focus

Economic Equity

• Def: Fair distribution of wealth

• Ideas: fairness vs efficiency

the fair distribution of resources, opportunities, income, and wealth, ensuring everyone has the tools to succeed regardless of background, race, or gender.

Economic Freedom

• Def: Ability to make own economic choices

• Ideas: start business, buy/sell freely

Mixed Economy

• Def: Blend of market + government control

• Ideas: most countries (like U.S.)

Profit

Revenue - cost

demand

willingnesss to buy a good / service at all prices

law of demand

if nothing else changes, the quantity demand if a good or service is greater or lower prices than higher

demand curve

price results in …

movement along the curve

• not price related

downward slope

supply

quantity of a good / service a firm is willing and able to produce at all prices

law of supply

if nothing else changes, firms are willing to supply a greater quantity of good or service at higher prices than lower

Public Works

Government funded projects

ex. roads / bridges

socialism

• Def: Some gov ownership, some private

• Ideas: reduce inequality

• public or collective ownership of the means of production (mines/factories/utlities)

• ex. china / north korea

Traditional Economy

• Def: Based on customs/traditions

• Ideas: farming, bartering, fishing

absolute advantage

• Def: Produce more with fewer resources

• Ideas: faster/better production

the ability of an individual, company, or nation to produce a greater quantity of a good or service using the same amount of resources, or the same quantity at a lower cost, compared to competitors. Proposed by Adam Smith,

Comparative advantage

• Def: Lower opportunity cost

• Ideas: trade benefits everyone

Commerce Clause

• Def: Gov regulates interstate trade

• Ideas: U.S. Constitution

designed to foster economic unity and prevent state-level trade rivalries,

Divison of Labor

• Def: Breaking work into tasks

• Ideas: increases efficiency

Mass production

producing large qualities

uses assembly lines / automation / specilized labor to lower costs and increase effeciency

speciliaztion

• Def: Focus on one task

• Ideas: improves skill/output

. By focusing on areas of comparative advantage, entities can reduce opportunity costs and increase total economic output through trade

Trade Barrier

• Def: Limits on trade

• Ideas: tariffs, quotas

• government-imposed restrictions—such as tariffs, quotas, and embargos—designed to limit international trade, shield domestic industries from foreign competition, and manage economic policy.

limits consumer choice / raises prices,

demand schedule

Table of prices & quantities

a table showing the quantity of a good or service consumers are willing and able to buy at various price points

demand shifters

factors that change demand

POINT

POINT

price of other goods

outlook - consumer expectations of future income / prices

income

number of potential customers

taste - fashion

Complementary good

• Def: Used together

• Ideas:cp3 player and record for it

Substitute good

• Def: Used instead

• Ideas: Coke vs Pepsi

When the price of one good increases, demand for its substitute rises

positive cross elasticity demand

elasticty

• Def: Responsiveness to price change

• Ideas:

  • elastic = sensitive

  • inelastic = not sensitive