Economics 1.4-1.5 Review

Terms from the notes packet.

Adam Smith

Known as the “Father of Economics,” he believed that competition was self-regulating and that the government should take no part in business.

Thomas Malthus

His focus was on resource efficiency and means of production.

Karl Marx

He believed that capitalism was a form of exploitation and predicted a future movement toward communism.

John Keynes

He believed that spending money is necessary for the flow of the economy, and that everyone saving during the Great Depression Era was causing an unbreakable cycle of economic decline.

Perfect Competition

A market structure characterized by an unlimited amount of small firms (meaning lots of competition), homogenous products, and easy entry and exit.

Monopolistic Competition

A market structure characterized by an unlimited amount of sellers, similar but not identical products, a low barrier to entry, and some control over pricing due to product differentiation. Examples include restaurants, clothing brands, and consumer electronics.

Monopoly (not the board game)

A market structure where a single seller dominates the market, limiting substitutes and controlling the supply of a product or service. The monopolist sets the price, as they have no competition, and there is a high barrier to entry.

Oligopoly

A market structure characterized by a small number of firms that dominate the market. These firms have significant market power, which allows them to influence prices and output levels. (Essentially a monopoly with multiple monopolists.)

Bank

Focus on financial needs; securely save money, loans, and investments.

Labor Union

Represents the collective interests of workers, bargaining with employers over wages and/or working conditions.

Market

The arrangement through which potential buyers and sellers come together to exchange goods and services

Corporation

A very impactful company. These make up 90% of all transactions and 60% of employment.

Co-Op

A business that realizes the economic, cultural, and social needs of the organization’s members and its surrounding community.

Sole Proprietorship

Gives an individual complete control over a business.

Partnership

Brings in new jobs, improves quality of life for residents, and other amenities

Non-profit

Make significant contributions to employment, employee compensation, and spending on charity work and tourism

Prices are determined by…

Supply and Demand

As price increases, demand…

…decreases

As price decreases, demand…

…increases

As price increases, supply ________

increases

As price decreases, supply ________

decreases

Equilibrium

A state of supply and demand being equal

Surplus

A state of the supply being greater than the demand (above equilibrium)

Shortage

A state of the supply being lesser than the demand (below equilibrium)

Disequilibrium

Any state other than equilibrium (surplus/shortage)

Subsidies

Money from the government given to business to relieve costs

What might shift the supply curve?

Production cost, disasters, number of suppliers, advancements in tech, taxes and subsidies

What might shift the demand curve?

Change in income, change in price of related goods, consumer preferences, expectations, number of consumers

Elasticity

The measurement of responsiveness of quantity Supply/Demand to a change in price

Inelastic

Insensitive to price; would take a drastic change in price to change the quantity

Elastic

Sensitive to price; a very small change could have a drastic effect on the quantity