ECON study guide

opportunity cost

value of the next better thing when a choice is made

mixed economy

the government and citizens make economic decisions

trade offs

all the other options and alternatives that you give up to choose an option

Business cycles

Expansion, recession, peak, trough, & depression

expansion

economy grows + expands

Recession

economy goes downhill

peak

highest point

trough

lowest point

depression

long recession

socialism

government owns industries but people can still have their own properties

hunger game

government controls everything

communism

the government owns all the property and resources but wealth is distributed equally

GDP

the value of all goods produced in a country in one year

Feasible point

inside or on curve (possible)

efficient points

on curve

impossible point

outside curve (not possible)

opportunity cost calculations

finding what you give up when you produce or already chose something else

opportunity cost calculations per unit

how much of one resource or good you give up to produce 1 unit of another good

4 factors of production

land: resources that are natural

labor: human work

capital: tools/machines

physical capital: equipment

human capital: education

entrepreneurship: business owners who take risks

inflation

increase in prices over time

core inflation

inflation that doesnt include food or energy

opportunity cost calculations per unit

the amount of one good that is sacrificed to get 1 unit each of another good

shifting ppc lines = factors that shift PPC

ppc shifts if resources or technology change

• right shift: growth

• left shift: decline

Comparative advantage calculation

who can produce a good at lower opportunity cost

PPI

price changes for goods at producer level

absolute advantage

produce good using same resources

law of demand

when prices go up, demands go down

capitalism

individuals and business are driven by their own profit and seek that

law of supply

prices go up and supply goes up

traditional economy

economy based on traditions and customs

GDP - 4 expenditure categories

C: consumer spending

I: investment

G: government spendign

X-M: exports-imports

market economy

individuals and businesses make decisions for the economy based off of supply and demand

CPI

change in prices that consumers pay for goods and services

redrawing PPC

the ppc graph adjusts to show growth, loss or specific something