ECONOMICS GR 12 UNIT REVIEW

nathania k

Economics

science of scarcity and choice, how people make decisions in the face of scarcity

Opportunity cost

The next best thing you could’ve chose

What you lose by choosing one thing over the other

Analytical (positive) economics

Factual (direct world observations) based economics

Normative (policy) economics

Statements/value judgement based economics

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opinion based economics

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The law of increasing opportunity cost

whenever you use a resource, there’s a cost to using it

the law of diminishing returns

after reaching a certain level, more production becomes less

Marginal product

extra product gained (additional output from adding input)

The law of increasing returns to scale

increase output with every input

productive resource

resources (natural, human, capital) used to make other resources

Demand

quantity of g&s buyers are willing to purchase (at various given prices/times)

The law of demand

as price increases, the amount purchased decreases

as price decreases, the amount purchased increases

quantity demanded

the total g&s consumers will demand over a given period of time

supply

quantity of g&s sellers are willing to offer (at various given prices/times)

the law of supply

as price increases, the amount supplied increase

as price decrease, the amount supplied decreases

quantity supplied

the total g&s suppliers will produce over a given period of time

equilibrium price

price set by s&d so the surplus/shortage is above/below that price

non-price factor

holds relationship between price&quantity and d&s (can influence)

substitute goods

consumers see 2 products similar enough that they can substitute them for each other

compliment goods

products that go well with each other (compliment each other)

elasticity

price change in response to G&s

ceiling price

cap gov places on the max something can cost

floor prices

cap gov places on the min something can cost

subsidy

business grant from gov

quota

limit to how much something can be produced

minimum wage

$ wage workers are paid for supplying labour to businesses with demand for it

corporation

owned by shareholders, distinct from its owners

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limited liability

sole proprietorship

single owner

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full liability

partnership

two or more person business

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shared liability

cooperative

equally owned by all workers/members

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worker owned

stakeholder

partner with interest in the company/profit

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ex. employer, customer, supplier, investor

the underground economy

underreported/not reported activity for tax/HST purposes

the theory of the firm

the firm exists & makes decisions to max profit

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relationship between profit, revenue, and costs fully developed

total revenue

total income your company makes

total cost

total expense after reaching a certain level of output

fixed cost

constant cost

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ex. rent or business cost

variable cost

fluctuating price: goes up with price increases, goes down with price decrease

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ex. wages or salary

theory of the firm

the firm exists & makes decisions to max profit

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relationship between profit, revenue, and costs fully developed

the short run

firm’s max capacity becomes fixed because of a shortage of one resource

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max capacity → fixed cost

the long run

period of time when fixed costs become variable costs

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fixed cost → variable cost

marginal revenue

additional **revenue** firm gains from producing 1 or + products

marginal costs

additional **cost** firm gains from producing extra product from extra workers

economies of scale

cost decreases when company increases production

perfect competition

uniform product + large # producers

Monopolistic competition

small diff products + large # sellers

Oligopoly

small # sellers

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hard entry

monopoly

one firm dominates market (complete control)

collusion

secret agreement between firms to change/reduce set prices

privatization

sell/transfer ownership of public assets to private firms

deregulation

removing gov control/rules from an economy

MRPL (marginal revenue product of labor)

additional revenue from marginal product by adding additional workers

labour union

organization of workers together that promote interests of members & negotiate with employees

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voluntary

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trade union

reps single occupation of workers regardless of where they work

strike

temporary shut down to force employer to meet union’s demands

lockout

owner shuts down the place until workers agree to meet their contract

GDP (gross domestic product)

total value of all g&s produced in a given time period (year)

unemployment rate

% of labour force not working at any given time

labour force

anyone over 15 currently employed, willing and able to work, or actively seeking

participation rate

% of labour force

full employment

least amount of unemployment

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seasonally adjusted

frictional unemployment

unemployment from people moving between jobs

seasonal unemployment

not all jobs can take place year round

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ex. salt truck people

cyclical unemployment

from reduction of overall spending

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downturns (and upturns?) in the economy

structural unemployment

==skills don’t match economy’s demand==

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ex. uni prof working at Starbucks??????????????????

Okun’s law

every % unemployment rate>natural rate, theres a 2% GDP increase

GDP gap

cost of unemployment measured by **how much potential output exceeds actual output** ???????

potential gdp

if **unemployment rate

inflation

increase in average general price levels

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includes factors of production (land, labour, capital)

Nominal GDP

gdp before inflation

real gdp

gdp deflator to remove effects of inflation

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inflation adjusted

LICO (low income cut off)

measure to determine which families spend most of their income on necessities (food, shelter, clothing) vs average family

Gini coefficient

measures gap between Lorenz curve and perfect equality line, and compares it to how much there could be

aggregate demand

total demand for g&s produced in an economy

aggregate supply

total supply for g&s produced in an economy

recessionary gap

g&s produces in recession vs normal

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gap between ad & full employment equilibrium, high unemployment, low inflation, low gdp growth

inflationary gap

g&s produced in inflation vs normal

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gap between ad & full employment equilibrium, high unemployment, low inflation, low gdp growth