personal finance and economics modules 1-6

Economics

The study of how humans make decisions in the face of scarcity

Scarcity

The human wants of goods, services, and resources exceed what is available

FRED Database

A website that contains nearly 400000 domestic and international variables over time.

Founder of economics

Adam Smith

Macroeconomics

The actions of an economy as a whole

Microeconomics

The actions of individual agents in a country

Keynesian Economics

Essentially predicted the post WW1 economy of America with excessiveness and then plummet, ending with a massive event (in this case WW2). Saving is Destruction.

Circular Flow Model

households receive services, firms get paid, firms pay people, firms receive labor

Traditional Economy

Occupations stay within the family, oldest sort of economy, little economic growth

Command Economy

Economic efforts are posed and controlled by rules and/or ruling class, what goods and services are produced are determined by the government, method of production and wages are determined by government, necessities are provided by the government

Market Economy

Decentralized economy, determined by private enterprise, value of impact determines wage

More regulations

Less market oriented

Globalization

Increasing cultural, political, and economic connections among people in the world. Economic Measure: International trade and financial capital flow

Exports/GDP

Total production

Opportunity Costs

What people must give up to obtain what they desire

Utility

Economist assumes the more units of good one consumes, the more good a person has.

Law of Diminishing Marginality

The 1st unit of good is always more utilitarian than later consumption.

Sunk Cost

Useless decisions. Argues the pros and cons of marginal benefits posed by the current and future, ignoring money.

Law of increasing oppurtunity cost

As the production of a good or service increases, so does the marginal opportunity cost

Productive Efficiency

Given available inputs and technology, it is impossible to produce one good without reducing the production of another.

Allocative Efficiency

A particular combo of goods and services on the PPC that represent the combo society likes the most.

Comparative Advantage

When a country can produce a good at a lower opportunity cost than another country.

Economic Systems

1. What goods and services should be produced?

2. How should they be produced?

3. who should receive those goods and services

Marginal Analysis

Examinations of decisions based on the margin which is a little more or little less than the status quo.

Marginal Benefit

What does that extra couple of dollars mean to you?

Underground Economy

Transactions without government approval

Production Possibility Frontiers

Demonstrates scarcity and the possibility of production

Positive Analysis

Can be tested and researched

Normative Analysis

Opinion based and based on biases and beliefs.

Demand

The amount of goods and services consumers are willing to purchase at each price

Price

What a buyer pays for a unit of a good or service

Quantity Demanded

How much people would buy of that product at the price

The Law of Demand

The inverse relationship between price and quantity demanded.

Supply

The amount of good and/or service a producer is willing to give at each price

Rise in Price

Less Quantity Supplied

Equilibrium

Where supply and demand meet

Diminishing Marginal Returns

As we add additional increments of resources to producing a good or service, the marginal benefit from those additional increments will decline.

Factors that affect demand

willingness to purchase, ability to purchase

ceteris paribus

other things being equal

tech innovations

lowers costs and increases supply. willing to supply a greater quantity at an equivalent or lower price.

changes in input prices

an increase of the price of an input decreases supply. smaller quantity supplied at the same price. higher price needed to sell same quantity.

Taxes and Subsidies.

Taxes shift supply curve point up. Subsidies shift supply curve point down.

Expectations

Shifts curve to the right

Entry or Exit of Producers

Moves curve to right or left depending on entry or exit

Income

demand increases with normal goods, decreases with inferior goods

Population

Shifting demographics change demand

Tastes

popularity increases or decreases depending on public sentiment

Related goods

Substitutes: the price of a competing good goes up, demand for the cheaper good increases

Complements: two products that increase the value for each other tying their value together

Expectations

a dip or increase in price manipulation in expectation of future events

Price Ceiling

A legal max price

Price floor

Legal min price

Consumer surplus

extra benefit consumers recieve from buying a good or service

Producer surplus

Extra benefit producers receive from selling a good or service