econ final

three main questions of economics

what to produce, how to produce, for whom to produce

Four factors of production

land, capital, labor, entrepreneurship

consumer good

an item intended for final use by a consumer

capital good

manufactured item used to produce other goods and services

paradox of value

the situation in which some non-necessities have a much higher value than some necessities

scarcity

the condition that results from society not having enough resources to produce all things people would like to have

utility

the capacity to be useful and provide satisfaction

division of labor

work arranged so that individual workers do fewer tasks than before

specialization

situation in which a factor of production performs tasks that it can do relatively more efficiently than others

trade-offs

alternative choices

opportunity cost

the cost of the next best alternative use of money, time, or resources when one choice is made rather than another

production possibilities frontier

diagram representing various combinations of goods and/or services an economy can produce when all productive resources are fully emplyed

proprietorship

business owned and run by one person

partnership

business jointly owned by two or more people

limited partnership

the inverstor’s responsibility for he debts of the business is limited by the sixe of his or her investments in the firm

corporation

a form of business organization recognized by law as a separate legal entity having all rights of an individual

horizontal merger

two or more firms that produce the same kind of product join forces

vertical merger

firms involved in different steps of manufacturing or marketing join together

conglomerate

a firm that has at least four businesses, each making unrelated products, none of which is responsible for the majority of the firm’s sales

multinational

a corporation that has manufacturing or service operations in a number of different countries

labor union

an organization of workers formed to represent its members’ interests in various employment matters

demand schedule

listing that shows the various quantities demanded of a particular product at all prices that might prevail in the market at a given time

demand curve

a graph showing the quantity demanded at each price that might prevail in the market

market demand curve

demand curve that shows the quantities demanded by everyone who is interested in purchasing the product

marginal utility

the extra usefulness or satisfaction a person gets from acquiring or using one more unit of a product

diminishing marginal utility

the extra or additional satisfaction received from using additional quantities of the product begins to diminish

change in demand

demand increases or decreases because people are willing to buy different amounts of the product at the same time

change in quantity demanded

movement along the demand curve that shows a change in the quantity of the product purchased in response to a change in price

income effect

the change in quantity demanded because of a change in price that alters consumers’ real income

inelastic

given change in price causes a relatively smaller change in the quantity demanded

elastic

given change in price causes a relatively larger change in quantity demanded

unit elastic

given change in price causes a proportional change in quantity demanded

law of supply

suppliers will offer more for sale at high prices and less at lower prices

theory of production

the relationship between factors of production and the output of goods and services

short run

period of production that allows producers to change only the amount of the variable input called labor

long run

period of production long enough for producers to adjust the quantities of all its resources, including capital

three stages of production

increasing returns, diminishing returns, negative returns

fixed cost

cost that a business incurs even if the the plant is idle and output is zero

variable cost

A cost that changes when the business rate of operation or output changes

total cost

the sum of the fixed and variable costs

marginal cost

the extra cost incurred when a business produces one additional unit of a product

total revenue

the number of units sold multiplied by the average price per unit

marginal revenue

the extra revenue associated with the production and sale of one additional unit of output

marginal analysis

a type of cost-benefit decision making that compares the extra benefits to the extra cost of an action

break-even point

the total output or total product the business needs to sell in order to cover its total costs

surplus

A situation in which the quantity supplied is greater than

shortage

price cielings

price floors

target price

a price floor for farm products

microeconomics

deals with behavior and decision making by small units

macroeconomics

deals with the economy as a whole, including employment, gdp, inflation, economic growth, and distribution of income

theory of competitive pricing

set of ideal conditions and outcomes

law of demand

the quantity demanded of a good or service varies inversely with its price

law of supply

suppliers will normally offer more for sale at high prices and less at lower prices.

law of variable proportions

quantity of output will vary as increasing units of a single input are added