Consumers, producers, governments, banks Flashcards
(48 cards)
What is a consumer in economics?
An individual or household that purchases goods and services to satisfy wants and maximize utility.
What is consumers’ primary objective?
To maximize utility (satisfaction) given their budget constraint.
How do consumers influence markets?
Through demand; their purchasing choices affect prices and what producers make.
What is consumer sovereignty?
The theory that consumer preferences ultimately determine the production of goods and services.
How does consumer confidence affect economic growth?
Higher confidence boosts spending, stimulating output; low confidence does the opposite.
What constraint limits consumer choices?
Their income/budget and prevailing prices.
What is marginal utility?
The additional satisfaction gained from consuming one more unit of a good.
What is diminishing marginal utility?
Each extra unit consumed yields less additional satisfaction than the previous one.
How can taxes influence consumers?
They reduce disposable income and can shift consumption patterns.
What role do consumers play in the circular flow?
They supply labor to firms and spend wages on goods and services.
What is the paradox of thrift?
When everyone increases saving, aggregate demand falls, potentially slowing the economy.
Why is price elasticity important to consumers?
It measures how sensitive their demand is to price changes, affecting spending decisions.
Who are producers?
Individuals or firms that combine inputs to create goods and services for sale.
What is their main objective in competitive markets?
To maximize profit.
What is a production function?
A relationship showing output obtainable from various input combinations.
What are economies of scale?
Cost advantages from increased production leading to lower average costs.
Which factors shift supply?
Input costs, technology, taxes/subsidies, expectations, number of sellers.
How do producers respond to consumer demand?
By adjusting output, product design, and pricing.
What is market power?
The ability of a firm to influence price above competitive levels.
Why is innovation crucial for producers?
It lowers costs, differentiates products, and can increase market share.
What is opportunity cost for producers?
The value of the next‑best alternative use of resources.
What are externalities related to production?
Costs or benefits imposed on third parties, e.g., pollution.
How can government regulation impact producers?
It can raise compliance costs or open opportunities (subsidies).
What is corporate social responsibility?
Voluntary actions by firms to achieve social/environmental goals beyond profit.
