chapter 2 Flashcards
(42 cards)
define economics
study of how society uses its scarce resources to produce and distribute goods dns services
What are the factors of production
- natural resources
- capital: factories, tools, money, machines
- knowledge: experience/wisdom of an organization
- human resources: people who work for an organization and talents they bring
define scarcity
productive resource with finite supply
– creates resource competition–> forcing trade offs
define economic indicators
statistics measuring the performance of the economy
types of economic indicators
- leading: economic changes happening in the future
- lagging: economic changes in the past
key economic indicators
- price index
- housing starts
- durable-goods offer
- unemployment rate
- gross domestic product
define the consumer price index
changes in price in relation to changes in price of goods/services
define producer price index
measure of price trends of producer/wholesaver
(what buisnesses are paying for the products they need)
define gross domestic product (GDP)
final value of goods and services produces by businesses located in the same nation.
define economic system
rules in which a society allocated economic resources
The spectrum of economic systems
- planned system: gov controls most factors of production
- free-market: decisions are made by buyers or sellers
- capitalism: economic freedom and competition.
nationalization vs privatization
nationalization– >taking owenership of chosen companies (from private to public)
privatization–> businesses go from public to private
Government role in a free market system
regulation–>rely more on laws +policies than market forces to govern economy
deregulation–> removal of regulations to allow market to correct itself over time.
4 major areas in which goverment plays a role in the economy
- protecting stakeholders
- fostering competition: so it does not become too strong.
- use antitust legislation so competitors have equal chance
- merger and acquisition approval–> prohbit from combining to preserve comp - encourage innovation and economic development
- stabilizing and stimulating economy
- monetary policiy–> regulates nations money supply- amount of spendable money in economy
- fiscal policiy–> use gov revenue collection to infuelnce buisness cycle.
Define demand
- amount of goods/services that customer will buy at a given time
describe the demand curve
- as price changes, the number of purchases change
- as price increases, demand decreases
- as price decreases, demand icncreases
factors that affect demand
- income of customers
- customer preference
- price of substitute products
- price of complementary products
define supply
quantities of goods/services producers will provide
describe the supply curve
as price increases, the quantity suppliers are wiling to provide increases
factors affecting supply
- cost of inputs (wages, fuel)
- number of competitors
- tech advanacemnts
what is the relationship between supply and demand
- equilibrium price: demand and supply intersect
The 4 catergories of competiton
- pure competition-> many suppliers, none of them dominate market
- monopoly–> one company dominates and controls prices in market
- monopolistic competition–> many sellers are different from competitors allowing new suppliers to enter market
- oligopoly–> small number of suppliers provide a particular service or goods
define recession
period of downward swing
if prolonged–> depression
period of recovery–> recession is over
define buisness cycle
fluctuations in rate of growth that a business experience’s
