Economics exam

Economics

The study of how individuals, businesses, and governments make choices about how to use limited resources to satisfy unlimited wants

Scarcity

The condition of something being in short supply relative to the demand for it

Production possibility curve

A graph used to illustrate the fundamental problem of scarcity

Law of diminishing returns

Outputs will increase when a particular input is increased, but only to a point

Opportunity cost

The next best alternative that must be given up when a choice is made

Economic system

Which societies organized the production and distribution of goods and services

Traditional economic system

Based on customs

Command economic system

Government controls resources

Market economic system

Decisions made by consumers and business

Mixed economic system

Combination of market and government control

Demand

Those were willing to purchase the product

Quantity demanded

The amount the consumers plan to buy during a given time period at a particular price

Supply

How much product the producers offer

Quantity supplied

A point on the supply curve, the quantity supplied at a particular price

Price determinants

Change in demand because of the price good itself

Non-priced determinants

Change in demand because of factors other than price

What causes shifts?

Changes in supply and/or demand cause graph to shift

What causes movement along the demand curve

Income, population, consumer taste and preferences, consumer expectations, price substitute good, price of complementary good

What causes movement along supply curve?

Cost, number of Sellers/producers, technology, nature in the environment, price of related outputs, government policies

Shortage

More demand than supplies

Surplus

More supply than demand

Graphing and determining shortage + surplus

Shortage bottom line of the graph, surplus top line of graph

In elastic goods

When change in quantity demanded is relatively smaller than price change

Elastic goods

When change in quantity demanded relatively larger than price change

Price elastic of demand

If the price elastic is greater than one, the demand is considered elastic if it’s less than one demand is considered in elastic

Calculating the price elasticity of demand and supply

PES=% change in price/% change in quantity supplied​

Calculating price elasticity of demand using total revenue

[(NewQ - OldQ)/Average]/[(NewP - OldP)/Average]

Government intervention

The government influence or control on the economy like promoting social welfare, imposing taxes, and setting minimum wage

Price ceiling

A limited by the government that says how high a price can be charged for a product or service

Price floor

A limit set by the government on how low a price can be charged

Loans

Money lend to you from another party in exchange for a future repayment

Bull market

When prices in a market are expected to rise

Bear market

When prices in a market are expected to fall

Types of industries

Primary industry, secondary industry, tertiary industry, quaternary industry, quinary industry

Primary industry

Extracting raw materials directly from earth

Secondary industry

Convert raw materials into finished goods

Tertiary industry

Service sector of industry

Quaternary industry

Specialized section of tertiary sector

Quinary industry

Highest level of decision-making in an economy

Perfect competition

Many firms, identical product sold, and easy to enter or exit this market

Monopolistic competition

Relatively large number of firms, differentiated products, and relatively easy to exit and enter market

Oligopoly

Few large firms, interdependent on each other very difficult to enter industry

Monopoly

Single firm, unique product and extremely difficult or impossible to enter industry

Gross domestic product

The total value of all the goods and services produced within a country over a certain period

Demand for resources

Demand for the inputs for the product