9 - Micreconomics

Basic Economic Concepts, Key Economic Institutions, Business Cycle, Scarcity and Opportunity Cost, Economic Systems, Economic Patterns, Markets, Supply and Demand

Microeconomics

the study of individuals and their decisions
(WHY people make the economic decisions they do)

Macroeconomics

the design and function of the economy as a whole
(HOW of institutions, policies, and outcomes of large-scale economies, such as those of regional, national, or global governments/ organizations)

circular flow

Both branches of economic thought (macro/micro) seek to understand the effect of the ______ _____ of goods, services, and money through the economy from consumers to producers and back again.

scarcity 

Economics is the study of how goods and services are produced, distributed, and consumed in an environment of ________ (unlimited wants and limited resources)

resources

not only physical items like land, equipment, and belongings but ALSO aspects provided by people, such as time and labor

efficient, distributed

Economists understand that:

individuals are not equally _______ at all tasks
resources are not equally _________ around the world
the amount of labor involved in a single task might differ from person to person

specialization, division of labor

economists highlight the role of ______________, limiting the range of production at the individual level for expanded range of total productivity/efficiency for the collective— the _________ __ ________ — in the modern global economy

Entrepreneurship

individuals identify/seize opportunities to create and grow new businesses or ventures based on gaps or unmet needs, fostering competition in a market economy, providing new goods/services or innovating existing production to increase supply.

supply, demand

Price/market is determined/controlled by:

_______ - the amount being MADE by producers
________ - the amount being ASKED for by consumers

law of demand

states that as the price of a good increases, the quantity demanded of the good will decrease (& vice versa)

law of supply

as the price consumers are willing to pay for a good increases, the quantity of the good supplied will ALSO increase (& vice versa)

producers

__________ are at a benefit from the increased price in the law of supply

consumers

__________ are at a detriment from the increased opportunity costs in the law of demand

institutions

In economics, ___________ are the formal organizations which help to regulate and govern economic activity between individuals, producers, and consumers.

Executive

In the US economy, branch responsible for proposing and managing the federal budget

Congress

In the US economy, branch responsible for budgetary funding and regulates tax law

major tax-collecting body of the US government; provides money for expenditures (which are approved by Congress)

The Federal Reserve

The central banking authority in the US, responsible for setting interest rates, regulating private banks and financial institutions, and other monetary policy

business cycle

describes the movement and growth of gross domestic product (influenced by many factors) in 4 stages: expansion, peak, contraction, trough

Expansion

business cycle’s INCREASE in production, employment, and sales, combined with lower interest rates and steady investment

Peak

the moment in the business cycle when the economy has reached its maximum level of growth (in production, employment sales, investments, and low interest rates)

Contraction

in the business cycle, the opposite of expansion (aka recession) characterized by lower sales, higher unemployment, and less production

Trough

in the business cycle, the END of the contraction period and beginning of the next expansion

government spend, imports/exports, spending habits, technology

the “GIST” of impacting factors on the business cycle:
G__________ ex”_______”iture
I_______/_________
S__________ ________ of consumers
T_____________ innovations

scarcity

All humans operate in a world where time, money, and natural resources are limited; the gap between resources you have available and all of your wants is called… 

cost-benefit analysis

When making a decision about how to use resources, all use _____-________ _________, making trade-off decisions when choosing between options.

opportunity cost

To determine the __________ ______ of an action, look at what else could have been done with the resources used— NOT all possible opportunities, JUST the next-best one.

resources

Because all __________ are scarce, all actions have an opportunity cost.

traditional economies

systems where goods are produced mainly for the consumption of one's own family/immediate circle and are exchanged or bartered based on basic surplus and needs/wants

complex economies

systems that form in industrialized societies to manage the means of production (Command, Market, or Mixed)

means of production

the resources used to produce a good

command economy

Which complex economy answers the questions…
What will be produced? Delegated/demanded by government alone
How will it be produced? Means of production are directly owned by the government
Who will consume it? Distribution of goods directly controlled by government

market economy

Which complex economy answers the questions…
What will be produced? What is demanded by consumers (based on consumer decisions and private profit motives)
How will it be produced? Means of production are privately owned
Who will consume it? The product’s market consumers based on decision/competition

mixed economy

Which complex economy answers the questions…
What will be produced? What is demanded by consumers/government
How will it be produced? Means of production are privately owned BUT have varying degrees of government control
Who will consume it? The market consumers based on decision/competition AND any government laws/restrictions and price/production quotas

mixed

Most modern complex economies are _______ Economies

exchanges

Patterns of economic activity are linked to production and consumption of goods and services— the more _________ happening, the more an area is considered economically active.

standard of living

Standard of economic activity in a given area/region has a direct effect on the _________ ___ _______ of its population, generally following that the MORE activity occurring in an area, the more economically DEVELOPED that place is considered.

land, labor, capital, entrepreneur

the “LLCE” of factors of production (that producers consider):
______ & ______ needed to produce their good
_________ needed to finance their operation
____________ who is able to manage these + go in on a product that can be put to market?

cities

large economic centers in US ______ have emerged as places where land, labor, capital, and entrepreneurship combine to generate economic activity and cyclically drawing MORE individual producers— new activity flourishes.

factor market

a market in which the factors of production are bought and sold
ex: labor market, raw material sales, and the market for management are all factor markets

wage, interest, rent, and profits can fluctuate based on its supply demands
ex: in a limited labor market, wage increases as companies compete for talent.

market

a space in which goods are exchanged, large or small scale

Pure Competition

The market structure where products are so similar there are infinite competitors
So many firms create the SAME product that additional profit is NOT gained and consumers typically just go with the cheapest product.
(ex- house shopping diff. sellers within same area/construction company, buyers just find the lowest interest rate of the options)

Monopolistic Competition

The market structure where MANY firms are present with competing but distinct products, low barrier to entry, and results in increased prices/profit possibilities that competitively drive innovation.
(ex- video game shopping, many differing products in competition for quality and pricepoint, many companies quickly rising and falling in the market)

Oligopoly

The market structure where only a FEW sellers are present, still competing with each other, but due to the few service providers, each stays aware/observant/strategizing against the other's action.
(ex: USPS vs FedEx vs UPS)

Monopoly

The market structure where one firm controls the price, production, and supply of a good, setting the price and demand inelastically— NO competition or innovation drive, consumers are at the mercy of the manufacturer

Capitalism

the primary economic system where private individuals or businesses own and control the means of production and operate for profit; primary goal is wealth creation and individual enterprise.
Markets are primarily driven by supply and demand, and the government plays a limited role

Socialism

the primary economic system where the means of production (factories, land, resources, etc.) are owned collectively or by the state and goods & services are distributed by the government based on need
The government plays a significant role in economic planning with the aim of reducing inequality and ensuring the welfare of all citizens.

Communism

the primary economic system where all property and means of production are collectively owned, and wealth is distributed according to need
Goal of classlessness & statelessness to eliminate private ownership and achieve complete economic equality

price

As consumers and producers pursue their individual well-being, they are motivated primarily by _____ (as determined by a good’s supply produced and demand asked)

increases

as the price of a good increases, the opportunity cost of that purchase __________

decreases

as the opportunity cost of a good/purchase increases (with a rises in price), the quantity demanded ___________

economies of scale

though production cost increases with produced amount, the __________ ___ ______ cause a reduction in price-per-unit by producing more (bulk)

equilibrium

A market is considered to be in ____________ when the quantity supplied is equal to the quantity demanded
Prices are constant and suppliers will remain constant

surplus

A market is considered to be in _________ when the quantity supplied is GREATER THAN to the quantity demanded
Prices will drop and suppliers will make less

Deficit

A market is considered to be in _________ when the quantity supplied is LESS THAN to the quantity demanded
Prices will rise and suppliers will make more

perceived value

While many consumers will pay a higher price for an item of higher quality, they will not spend if the price exceeds the __________ _______ of the product. ex: will pay $7 for a fancy cup of coffee, will not pay $20

equilibrium point

If the perceived value of a product INCREASES, demand curve will increase (shift R), quantity supplied will follow (increase/R shift), and resultingly have INCREASED price at the new _____________ ______ (where the two curves intersect)

gain

Opportunity Cost = (Best thing sacrificed) / (the _____ chosen)