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Flashcards in Economics Deck (97):
1

Economics

The science that studies the choices of people trying to satisfy their wants in a world characterized by scarcity

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Scarcity

Wants greater than resources

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Opportunity Cost

What you give up to do what you are doing

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Zero Opportunity Cost

Exists when someone doesn't give up anything in choosing to do something else

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Macroeconomics

The big picture

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Satisfaction

Utility

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Choice

A consequence of scarcity

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Zero Price

No dollars or cents are charged for a good

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Free Rider

Receives the benefits but does not pay anything

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Private Good

Benefits of the good can be denied to a person

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Public Good

Benefits of the good cannot be denied to anyone

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Contract

An agreement between two or more people to do something

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Total Revenue

Price times number of units sold

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Incentive

Encourages or motivates a person toward action

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Law of Demand

Price and quantity demanded move in opposite directions

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Law of Diminishing Marginal Utility

Eventually the utility of additional unit decreases

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Quantity Supplied

Specific number of units of a good produced and offered for sale at a specific price

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Unit Elastic

Percentage change in quantity demanded equals percentage change in price

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Increase in Resource Prices

Will end up shifting supply curve to the left

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Normal Good

Income rises, demand for good rises

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Substitutes

Price of good A moves in the same direction as demand for good B

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Shortage

Exists when quantity demanded is greater than quantity supplied

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Surplus

Exists when quantity supplied is greater than quantity demanded

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Equilibrium Price

The price that exists in the market when the quantity supplied of a good equals the quantity demanded

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Equilibrium

The market setting in which the quantity supplied of a good equals the quantity demanded

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Brute Force

A rationing device that is not commonly used today in the United States

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Price

A commonly used rationing device in the United States

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Fixed Cost

Does not change as business firm produces more units of a good

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Board of Directors

Chosen by the stockholders of the firm

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Corporation

Form of business organization in which owners have unlimited liability

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Marginal Revenue

Additional revenue gained from selling an additional unit of a good

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Partnership

Form of business organization in which owners have unlimited liability

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Stockholder

One of the owners of the corporation

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Total Cost

Fixed cost plus variable cost

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Government Monopoly

Legally protected from competition

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Copyright

Like a patent, but for authors or publishers

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Perfect Competition

A market in which firms have no control over price

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Monopolist

Single seller of a good

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Monopolistic Competition

Many sellers and slightly differentiated products

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Oligopoly

Few sellers and identical or slightly differentiated products

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Patent

Effective for 17 years

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Equilibrium Wage Rate

The wage rate at which the quantity of labor supplied equals the quantity demanded

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Right-To-Work-Law

Law that makes it illegal for employers to requre union membership as a condition of employment

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Minimum Wage

A wage rate determined by Congress

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Unemployment Rate

The number of persons unemployed divided by the number of persons in the civilian labor force

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Closed Shop

An organization that hires only union members

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Union Shop

An organization that does not require individuals to be union members in order to be hired but does require them to join the union within a certain period

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A Retired Person

An example of a person not in the labor force

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A Person on Strike

An example of an employed person

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Positive Balance of Trade

Exports greater than imports

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Negative Balance of Trade

Exports less than imports

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Comparative Advantage

Producing at lower opportunity cost

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Tariff

A tax on imported goods

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Quota

A legal limit on the amount of a good that may be imported

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Infant-Industry Argument

Idea that new industries have to be given time to develop

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Dumping

Selling below cost and below the price domestic residents are asked to pay

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Appreciation Occurs

When a nation's currency fetches more of some other nation's currency

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Cooperative

A business that provides services to its members and is not run for profit

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Sole Proprietorship

A business that is owned by one individual who makes all business decisions, receives all the profits or takes all the losses of the firm, and is legally responsible for the debts of the firm

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Limited Partner

In a limited partnership, a partner who cannot participate in the management of the firm and who has limited liability.

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General Partner

In a limited partnership, a partner who is responsible for the management of the firm and who has unlimited liability

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Dividend

A share of the profits of a corporation distributed to stockholders

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Asset

Anything of value to which the firm has legal claim

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Bond

A statement of debt issued by a corporation. The corporation promises to pay a certain sum of money at maturity and also to pay periodic fixed sums until that date

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Franchise

A contract by which a firm (usually a corporation) lets a person or group use its name and sell its goods in exchange for certain payments being made and certain requirements being met

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Marginal Costs

The change in total cost that results from producing an additional unit of output

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Variable Costs

Cost, or expense that changes with the number of units of a good produced

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Profit

The amount of money left over after all the costs of production have been paid. Profit exists whenever total revenue is greater than total costs.

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Wage Rate

The price of labor

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Minimum Wage Law

A federal law that specifies the lowest hourly wage rate that can be paid to workers, this law is established by Congress

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Labor Union

An organization that seeks to increase the wages and improve the working conditions of its members

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Taft-Harley Act

An act, passed in 1947 by the U.S. Congress, which gave states the right to pass right-to-work laws. These right-to-work laws prohibit employers from establishing union membership as a condition of employment

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Downsizing

Restructuring a firm and decreasing its size so that it is a less costly, more productive, more efficient operation

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Global Competition

Competition from all over the world. American business firms and workers today are said to be faced with global competition.

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Technology

The body of skills and knowledge concerning the use of resources in production

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Barter Economy

An economy in which trades are made in goods and services instead of money

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Double Coincidence of Wants

The situation in which each of two parties to an exchange has what the other wants

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Money

A good that is widely accepted for the purposes of exchange

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Face Value

The stated denomination on paper money or coins

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Checking Account

A deposit that is withdrawable on demand and transferable by means of a check. It is also known as a demand deposit and is the largest component of the money supply

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Near Money

Assets, such as non checking savings accounts, that can be easily and quickly turned into money

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Debit Card

A card that can be used to withdraw funds at automated teller machines and to pay for purchases by electronically transferring funds from one account to another

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Money Supply

The total supply of money in circulation, composed of currency, checking accounts, and traveler's checks.

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Reserve Requirement

A regulation which requires a bank to keep a certain percentage of each dollar deposited in the bank in its reserve account at the Fed or in its vault (as vault cash)

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Open Market Operations

Buy and selling of government securities by the Fed

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Discount Rate

The interest rate the Fed charges a member bank for a loan

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Federal Funds Rate

The interest rate one bank charges another bank for a loan

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Demand-Side Inflation

An increase in the price level that originates on the demand side of the economy

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Supply-Side Inflation

An increase in the price level that originates on the supply side of the economy

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Deflation

A decrease in the price level

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Full Employment

The situation that exists when the official unemployment rate equals the natural unemployment rate

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Frictional Unemployment

Refers to workers who have lost their jobs because of changing market (demand) conditions and who have transferable skills

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Structural Unemployment

Refers to workers who have lost their jobs because of changing market (demand) conditions and whose skills do not match the requirements of available jobs

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Specialize

To do only one thing. For example, when a country specializes in the production of a good, it produces only that good.

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Comparative Advantage

The situation in which a country can produce a good at a lower opportunity cost than another country

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Economic Integration

When nations combine to form either a common market or a free-trade area

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NAFTA (North American Free Trade Agreement)

Created a free trade area for Canada, the United States, and Mexico