economics final review

Here’s a comprehensive breakdown of the economics vocabulary and concepts you’ve listed:

1. Factors of Production

The resources used to produce goods and services:

• Land: Natural resources (e.g., water, minerals).
• Labor: Human effort (physical/mental).
• Capital: Tools/machinery (physical) or money (financial).
• Entrepreneurship: Innovation/risk-taking to combine other factors.

2. Production Possibilities Frontier (PPF/PPC)

• A curve showing maximum combinations of two goods an economy can produce with given resources.
• Key Points:
  • Points on the curve = efficient production.
  • Inside = inefficient/unemployed resources.
  • Outside = unattainable without growth (e.g., more resources/tech).

3. Economic Systems

4. Elements of the American Economy

• Market Elements (6):

1. Private property.
2. Profit motive.
3. Consumer sovereignty.
4. Competition.
5. Voluntary exchange.
6. Limited government.

• Command Elements (3):

1. Public goods (e.g., roads).
2. Regulations (e.g., FDA).
3. Redistribution (e.g., welfare).

• Mixed Economy: Combines market freedom with government intervention.

5. Demand

• Law of Demand: Price ↑ → Quantity demanded ↓ (and vice versa).
• Shifts vs. Movement:
  • Shift (change in demand): Caused by non-price factors (BRIDE).
  • Movement: Price changes cause movement along the curve.
• BRIDE Shifters:
  • Buyers (number of).
  • Related goods (substitutes/complements).
  • Income (normal vs. inferior goods).
  • Demographics.
  • Expectations (future prices/income).
• Elasticity:
  • Elastic: Quantity changes a lot with price (e.g., luxuries).
  • Inelastic: Quantity changes little (e.g., necessities like insulin).

6. Supply

• Law of Supply: Price ↑ → Quantity supplied ↑.
• Shifts vs. Movement:
  • Shift (change in supply): Non-price factors (GROOM).
  • Movement: Price changes cause movement along the curve.
• GROOM Shifters:
  • Government (taxes/subsidies).
  • Resource costs.
  • Other goods’ prices.
  • Output (technology/productivity).
  • Market size (number of sellers).

7. Equilibrium

• Where supply = demand; no surplus/shortage.
• Price Signals: Surplus (price ↓) or shortage (price ↑) push market back to equilibrium.

8. Price Controls

• Price Floor: Min price (e.g., minimum wage) → surplus.
• Price Ceiling: Max price (e.g., rent control) → shortage.

9. U.S. Socioeconomic Goals

1. Economic Freedom: Choice in work/spending.
2. Economic Equity: Fair distribution (e.g., anti-discrimination laws).
3. Economic Security: Safety nets (e.g., Social Security).
4. Economic Efficiency: Maximize resource use.
5. Economic Growth: Increase GDP over time.
6. Full Employment: Low unemployment.
7. Price Stability: Control inflation.

10. Market Structures

• Non-Price Competition: Advertising/branding (common in monopolistic competition/oligopoly).
• Game Theory: Analyzes strategic decisions (e.g., oligopolies’ pricing).

11. GDP (Gross Domestic Product)

• Total value of goods/services produced in a country in a year.
• Measurement:
  • Expenditure Approach: C + I + G + (X – M).
  • Income Approach: Wages + rent + profit + interest.
  • Trump’s Proposal: Include intangible assets (e.g., R&D) to boost GDP.
• Importance: Primary indicator of economic health.

12. Business Cycle

1. Expansion: GDP ↑, employment ↑.
2. Peak: Highest growth before contraction.
3. Contraction/Recession: GDP ↓ (2+ quarters).
4. Trough: Lowest point before recovery.
5. Depression: Severe, prolonged recession.

13. Inflation

• CPI (Consumer Price Index): Tracks urban household prices.
• PCE (Personal Consumption Expenditures): Broader (includes healthcare).
• Ideal Inflation: ~2% (Fed target).
• Types:
  • Demand-Pull: Too much spending (demand > supply).
  • Cost-Push: Rising production costs (e.g., oil prices).

14. Interest Rates

• ↑ Rates: Borrowing cost ↑ → consumer spending ↓.
• ↓ Rates: Stimulates loans/spending.

15. Taxes

• Types