Business econ u2

Macroeconomics - study of systems/structure, behavior, and decision-making of an economy as a whole of short and long-term business cycles  - HOW does a society allocate, produce, and consume resources, goods, and services


Microeconomics - study of behavior of individuals and businesses in making decisions regarding allocation of scarce resources and the interactions between them


Economic systems - the way a society allocates, produces, and distributes resources, goods, and services

  • Command - Decisions fall onto select leaders, government control

  • Mixed - mixed version of other market systems

  • Market - Consumers affect producer decisions, individuality is encouraged, trade

  • Traditional - based on traditions/customs within a society


Four Factors of Production - factors needed to produce

  • Land - Natural Resources

  • Capital - Physical and intangible Human Capital like training skills, copyright, patents, the intellectual property AND Money

  • Labor - Physical/Mental work

  • Entrepreneurship - the upstarter, person willing to begin


Economic Philosophies

  • Capitalism - Private individuals and enterprises own means of production and profit from them, private property is enforced as an incentive to produce, free market system, rich vs poor

  • Communism - Classless system, production and property are communally owned, no money

  • Socialism - Production for use not profit, distribution of wealth and resource among all, no competitive buy and sell, free access to goods and services

  • Adam Smith - “Father of Modern Economics” - capitalist who believed wealth is created via labor, and self-interest spurs people to use their resources to earn money

  • Karl Marx - communist who believed capitalism would eventually destroy itself as more people become relegated to working-class status, inequality rises, and competition drives corporate profits to zero


Supply & Demand

  • How to read and apply a S&D chart and curve shifts, revenue

  • Factors that affect supply & demand - Substitutions, Competition, Taxes, Regulation

  • The Market - any structure that allows buyers and sellers to exchange any type of goods, services and information

  • Equilibrium = market clearing price, equality of supply and demand

  • Elastic Demand - demand that is highly responsive to price changes

  • Inelastic Demand - demand for a good or service remaining relatively unchanged when the price moves up or down

  • Surplus - Supply exceeds demand

  • Shortage - Demand exceeds supply

  • Price Floor - minimum price a producer can sell decided by gov

  • Price Ceiling - maximum price a producer can sell decided by gov

Market Structures

  • Perfect Competition - many buyers and seller, identical products, and no barriers to enter the market - No control over the price, perfect full info, supply and demand equilibrium - NO Surpluses and not shortages

  • Imperfect Competition - Not Perfectly Competitive One or more conditions are not met

  • Monopolistic Competition - many companies are present in an industry, and they produce similar but differentiated products

  • Duopoly - two competitors in control of market

  • Oligopoly - market in which pricing control lies in the hands of a few sellers, can influence prices through manipulating the supply function

  • Monopoly - an enterprise that is the only seller of a good or service, free to set any price it chooses and will usually set the price that yields the largest possible profit