ECON FINAL

4 factors of production including definitions of labor, land, capital, entrepreneur (be able to name and

identify examples of each)?

Land (Human Resources), ex labour, capital good (human made good used to make another good), entrepreneur (RISK).

Production possibility points on grapgh  . 3 givens, a point inside and a point outside, what causes shifts ?

Point on curve: efficient, Outside of curve: impossible, Inside of curve: underutilization/inefficent. Shifts in the Curve: Caused by changes Resources Technology Labor force growth or shrinkage.

Production possibility curves

Maximum efficiency, maximum resources, and maximum technology.

how opportunity costs are determined.

The more you produce of one  thing the higher the opportunity cost for the other.

what economic efficiency, growth, stability, freedom, and security are?

Economic growth- imporove standard of living. Freedom- to choose what you want. Stability- grow, but not too fast or inflation. Efficiency- full employment ( have as many worker as possible). Security- safety net/if loss of job.

Guns v. Butter.

Opputunity cost for a country between allocating resources for military or consumer goods.

Define opportunity costs

cost the value of your second choice.

technology-/

tools to improve production

Underutilization

When you make below the efficient line on a ppc, dont use up all your resources, some left over.

Scarcity

Unlimited wants, limited resources, the more scarce something is the more it costs.

Competition

The struggle among producers for the dollars of consumers

Incentive

things that entice you to act a certain way. How people act a certain way.

Laissez Faire:

Hands off government

Market economy

answered with the interaction between producers and consumers

command

leader or central authority makes all of the decisons.

Traditional

economic practices are held to a standard that has remained unchange

advantages and disadvantages of market and command economies and what does an economic

system do?

P: able to solve problems manageably N: stuck in a repetitive cycle of society

(Command) P: only way to conduct economy in times of distress N: sometimes press people in unwanted positions

(Market) P: wide-spread freedom N: usually taken for granted.

law of Demand-inverse relationship between price and quantity demanded

as $ increases, quantity demand decreases- as $ decreases, quantity demand increases.

law of supply

direct relationship between price and quanity as price increases, quanity supply increases.   

demand

the ability and willingness to consume (at every price).

elestastic

how repsonive quanitity is to a chnage in price

Inelastic

change in price is greater then change quanity

Allocation

means divide up and use 20hrs free time

quaninty demand and supply

price inversely effects QD but does NOT change demand!! at every price there is demand, but just the quantity changes.

List the 6 determinants of Demand

1. change in the price of substitute good (direct)

2. change in the price of complement good (INDIRECT:

demand less bc need to buy comp good as well)

3,change in preference (direct)

4,  change in # of consumers (direct)

5. change in income (direct)

•   higher income, more consumption

•   inferior good: what you buy less of when your income

increases

6. change in expected price (future prices) - (direct)

4 factors shift supply

1change in price of resources (land, labor, capital)

2. change in tech.

3. 3.change in politics

- follow the money --> taxes = govnt ($ increase, QS decrease), subsides = businesses ($ increase, QS increase

4. change in # of suppliers (environment)

Demand and supply shifts

Increase in Demand → Demand curve shifts right → Price & quantity increase

Decrease in Demand → Demand curve shifts left → Price & quantity decrease

Increase in Supply → Supply curve shifts right → Price decreases, quantity increases

Decrease in Supply → Supply curve shifts left → Price increases, quantity decreases

equilibrium

when supply of a good or service equals that which customers are willing to buy (demand).

price floors:

A legal minimum on the price at which a good can be sold.

price ceilings:

A legal maximum on the price at which a good can be sold.

shortage

situation in which the demand for a product or service exceeds its supply in a market -> below the equilibrium line.

Surplus

when fewer supplies are used than were retained -> above the equilibrium line

perfect competition:

"ideal" - does not exist bc "its so competitive that its not competitive"

- everyone sells the same product (identical)

- many buyers + sellers

- consumers are well-informed

- EASY to enter and exit [market

monopolistic competition:

want to be like this

- many sellers + buyers

- consumers are well-informed

- somewhat easy to enter and exit market

- similar products

‹ PRODUCT DIFFERENTIATION

oligopoly

colluion)

- 2-4 companies that control the market (few sellers)

- DIFFICULT to enter the market

- similar product

(coke vs pepsi) —> NO PRICE WARS

- work together to set prices = collusion (supposed to be illegal)

- competing would mean they both lose

monopoly

company is so big, no one can compete with it‹ economies of scale: the property as quantity of output decreases, long-run average total cost increases.

difference of perfect competition and monopolistic competition ie differentiation .

In perfect competition, all firms sell identical products, making them perfect substitutes. In monopolistic competition, firms offer differentiated products, allowing them some control over price.

How much influence on price each competitor has on price in each type of competition. I

In perfect competition, no single competitor has much influence on price; prices are determined by market supply and demand. In monopolistic competition and oligopoly, competitors have more influence, with firms using pricing strategies to differentiate their products or compete on price. Monopolies have the most influence, as a single firm can dictate both price and supply.

WHat is patent and its purpose?

allows exclusive rights over an invention (copyright) the first 12-18 years you create it —> tactic in technological monopolies

Explain the supply and demand of wages and what 2 things interfere with this.

1. unions: there are thousands of people that could do a better job than an individual, but the union protects them 2. minimum wage: causes a surplus of workers because of the price floor.

What is collective bargaining and what tactics are used by the parties involved?

unions negotiate with management for workers as a group. they negotiate, picket (rallly and boycotting). if ALL processes fail: mediation (3rd party) to help with negotiations (not legally binding)-> if not mediation: arbitration (judge helps decide: LEGALLY BINDING)

mediation

A method of settling disputes outside of court by using the services of a neutral third party, called a mediator. The mediator acts as a communicating agent between the parties and suggests ways in which the parties can resolve their dispute.not legally bound.

abritation

settling a dispute by agreeing to accept the decision of an impartial outsider like a judge legally bound.

Name and describe the 5 characteristics of money

money. 1. Stability- how well it can hold its value (is it easy to counterfeit?)2. Portability- has to be able to be carried around easily3. Acceptability- people have to be able to agree to use it4. Divisibility- ex. cow is hard to divide up5. Durability- can withstand being passed around, weather, wear and tear (ex. money has cotton/denim).

1. 3 uses of money

1. medium of exchange

- makes trade easier!!

- bartering = not efficient

- need common denominator/currency to make everything more efficient

2. store of value

- represents + stores value

- time and effort --> stored in the currency

3. unit of account

- common + uniformed

the 3 sources of value

1. commodity

- the currency itself has value (ex. oranges have value)

- gold: #1 currency commondity

- only metal that won't rust

--> eventually not conductive

- not enough, distributed

2. representative

- govnt uses different currency to represent a commodity

- silver certificate: bank had $1 worth of silver -> use certificate to exchange for the actual commodity (silver)

3. fiat (latin for "trust")

- fiat currency has value bc the govnt says it does

- you have yo use that currency unless otherwise stated in a contract (rule stated in the bill)

What is the current source of value of the US dollar?

FIAT

credit card,

loan from bank,

debit card

checking account

Check

put into checking account.

supply and demand of loanable funds and the role of financial intermediaries and what they are?

Supply putting money in bank, and demand is borrowed money

Liquidity

its how accesible money is

Diversification

spreading the risk.

Risk

how likely you are going to see your money again,

Stock

ownership of the company

Bonds

Loans

Explain the purpose, benefits, and negatives of various investment tools including money markets mutual funds, stocks, and bonds.

Money Markets- glorified checking limited access, 2-3%. Mutual funds- diversify with low amount of money. Corporate bond- lending money to a company. Treasury bond - lending money to The federal government.

Junk bonds

extremely risky

Munciple bonds

local or state govt.

Corporate

lending money to the company

Treasury bond

lending money to the federal government

GDP and GNP

Total dollar value of all final users goods and services produced in a country in a year. And GNP is “by”.

Excluded

anything used, underground economy not taxable, purely financial transaction, and further processed

Uses

compare a country or time, compare two different countries

Problems

does not stand alone , needs more information ,just a number doesn',tell whatis produced

4 parts of the business cycle and be able to state what is likely to occur during each.

1. Expansion- GDP goes up. Peak- GDP is maxed out. Contraction- more then 6 months which is a recession and GDPgoes down. Trough- is the lowest point.

2. aggregate- total or some ecomic

aggregate

total or some economic activity

Recession

is decline in economic activity

Depression

severe economic downturn

Extranilty

unattended consequence.

employed

work a minimum of 1 hour of taxable income every 2 weeks

Unemployed

not having a job but actively seeking

Labor force:

employed and unemployed

Underemployed

have job below skill level

Cyclical

unemployment that causes more unemployment which is bad eceonmy

Frictional

people between jobs

Seasonal

out of work because of schedule

Strcutuacl

skills/ location mismatch

Know how market baskets and CPI are related to inflation

Items surburabn person will purchase.

Cost push

is supply side inflation giverntemnt incerse minimum wage and business increases there price.

Demand pull

consumers wants and needs increases price.

How does supply shock cause high inflation?

Something unexpected happens which raises inflation.

Socialism

allows democratic process

communisim

govt controls 4 basic questions

capitalism

Capitalism can influence political systems, as those with more wealth often have greater influence in policy-making.

public good:

This means that once a public good is provided, it's impossible to prevent anyone from using it.

allocation:

how resources are distributed to the people who desire the resource

fiscal policy:

any policy taken by govt. on how the govt. earns or soends money.

2 types of fiscal:

Expansionry and contractionery

Expansionary

trying to get econ to grow, cut taxes/ increase GDP, another way to increase money

contractionary

increase taxes/slows econ,another policy is cut govt. spending

3 classfication of taxes

proportinal, progressive, and regressive. based on % of your income thats taxed payed.

progressive tax

more money you make the more your taxed depends on income (10%-20%).

regressive tax:

less money u make, the more tax you pay (all flat taxs,sales, etc)

proportional tax:

no matter, what income is you paid the same (2people with different income paid 10% of income)

What are taxes that we pay property taxes, sales tax excise, tax hidden in the price?

What did the business had to pay so pass down to us tariffs ,gas sin , and taxes are all part of it.

Mandatory

REQUIRED BY LAWS

Discretionary

THE PART OF THE BUDGET THAT IS NOT REQUIRED BY LAW USUALLY 32-38% OF FEDERAL BUDGET.

classical

ADAM SMITH/LAISSEZ-FAIRE – let the economy run itself/ no government interference employment. 

Keynesian

NAMED AFTER JOHN MAYNARD KEYNES-government only spends what is necessary for optimal GDP.