the study of how people seek to satisfy their needs and wants by making choices
economics
something necessary for survival; i.e. air, food, shelter, etc.
need
an item we desire but that is not necessary for survival
want
physical objects such as clothes or shoes
goods
actions or activities that one person performs for another; i.e. babysitting, haircuts, tutoring, gardening, mechanic
services
the three groups of resources that are used to make all goods and services
factors of production
What are the three factors of production?
land
labor
capital
all natural resources used to make goods and services
land
effort that people devote to a task for which they are paid
labor
any human made resource that is used to create other goods and services; there are two kinds, physical and human
capital
Give an example of physical capital.
tools, building, etc.
Give an example of human capital.
skills, knowledge, etc.
What are the three key economic questions?
- What goods and services should be produced?
- How should these goods and services be produced?
- Who consumes these goods and services?
the method used by a society to produce and distribute goods and services
economic system
economic system that relies on habit, custom or ritual to decide questions of production and consumption of goods and services
traditional economy
economic system in which decisions on production and consumption of goods and services are based on voluntary exchange in markets
market economy
economic system in which the central government makes all decisions on the production and comsumption of goods and services
centrally planned economy
economic system in which a central authority is in command of the economy; a centrally planned economy
command economy
market-based economic system with limited government involvement
mixed economy
Economy of the Soviet Union
5th Amendment
ensures private property rights
14th Amendment
protects and gives freedom for contractual agreements
16th Amendment
protection from over taxation by basing it on income
the study of the behavior and decision making of entire economies
macroeconomics
the study of the economic behavior and decision making of small units, such as individuals, families, and businesses
microeconomics
standard of living
public goods
externalities
desire to own something and the ability to pay for it
demand
consumers buy more of a good when its prices decreases and less when its price increases
law of demand
the amount of goods available
supply
tendency of suppliers to offer more of a good at a higher price
law of supply
a good that consumers demand less of when their incomes increase
inferior good
a good that consumers demand more of when their incomes increase
normal good
Describe the elasticity of supply and demand. (Unit 2 Test #5)
the demand and supply of a good are affected by a change in price. as price increases, demand decreases, but as the price increases, the supply increases.
the total amount of money a firm receives by selling goods or services
total revenue
a cost that does not change, no matter how much of a good is produced; i.e. building rent, worker’s salaries
fixed cost
a cost that rises or falls depending on how much is produced; i.e. electric, water, heating bills
variable cost
the point at which quantity demanded and quantity supplied are equal
equilibrium
situation in which quantity demanded is greater than quantity supplied; also known as excess demand
shortage
a sudden shortage of a good
supply shock
a system of allocating scarce goods and services using criteria other than prices
rationing
when quantity supplied if more than quantity demanded; also known as excess supply
surplus
What can producers do when they have a surplus of their goods?
Lower prices to sell more
a market structure in which a large number of firms all produce the same product
perfect competition
a market dominated by a single seller
monopoly
a market structure in which many companies sell products that are similar but not identical
monopolistic competition
What are the four conditions for perfect competition?
- Many buyers and sellers participate in the market
- Sellers offer identical products
- Buyers and sellers are well informed about products
- Sellers are able to enter and exit the market freely
What are the four conditions for monopolistic competition?
- Many firms
- Few artificial barriers to entry
- Slight control over price
- Differentiated products
a product that is the same no matter who produces it; i.e. petroleum, notebook paper, or milk
commodity
any factor that makes it difficult for a new firm to enter a market
barrier to entry
a market structure in which a few large firms dominate a market
oligopoly
the ability of a company to change prices and output like a monopolist
market power
division of customers based on how much they will pay for a good
price discrimination
What three conditions does a market need to meet for price discrimination to work?
- Some market power
- Distinct customer groups
- Difficult resale
an establishment form to carry on commercial enterprice
business organization
a business owned and managed by a single individual; the most common forms of business organizations
sole proprietorship
Advantages of Sole Proprietorship:
Disadvantages of Sole Proprietorship:
a business organization owned and managed by two or more people
partnership
a partnership in which one partner has unlimited personal liability for the firm’s actions
limited partnership
partnership in which partners share equally in both responsibility and liability
general partnership
partnership in which all partners are limited partners
limited liability partnership (LLP)
a contractual agreement between partners detailing the responsibilities and liabilities of each person
articles of partnership
Who is responsible for labor statistics?
The Bureau of Labor Statistics
a temporary or part-time job
contingent employment
labor that requires no special skills, education, or training; i.e. a janitor
unskilled labor
labor that required minimal specialized skills and education; i.e. a short order cook
semi-skilled labor
labor that requires specialized skills and education; i.e. a mechanic
skilled labor
labor that requires advances skills and education; i.e. a doctor
professional labor
someone who works in an industrial job, often in manufacturing, and who receives wages
blue-collar worker
someone in a professional or clerical job who usually earns a salary
white-collar worker
a settlement technique in which a neutral mediator meets with each side to try and find a solution that both sides will accept
mediation
a settlement technique in which a third party reviews the case and imposes a decision that is legally binding for both sides
arbitration
joining two or more firms involved in different stages of producing the same good or service
vertical merger
joining two or more firms who produce the same good or service
horizontal merger
three or more firms that produce unrelated products
conglomerates
an unofficial, invisible barrier that prevents women and minorities from advancing in business dominated by white men
glass ceiling
anything that serves as a medium of exchange, a unit of account, and a store of value
money
What are the six characteristics of money?
Durability Portability Divisibility Uniformity Limited Supply Acceptability
The United States central banking system
Federal Reserve System
a banking system that keeps only a fraction of funds on hand and lends out the remainder
fractional reserve banking
interest that builds on the principal amount only
simple interest
interest that builds on the principal amount the first time, then the new amount the second time, and so on; takes interest on the compounded amount each time
compound interest
anything a person has that holds value or worth, including nonmonetary items; i.e. all cash, a person’s house, car, etc.
financial assets
institutions that help channel funds from savers to borrowers
financial intermediaries
bonds
NYSE
an overview of the stocks of the top 30 companies
The Dow
an overview of the stocks of 500 companies
S&P 500
unemployment that occurs when people take time to find a job
frictional unemployment
unemployment that occurs as a result of harvest schedules or vacations, or when industries slow or shut down for a season
seasonal unemployment
unemployment that occurs when workers’ sills do not match the jobs that are available
structural unemployment
unemployment that rises during economic downturns and falls when the economy improves
cyclical unemployment
the percentage of the nation’s labor force that is unemployment
unemployment rate
working at a job for which one is over-qualified, or working part time when full time work is desired
underemployed
a general increase in prices
inflation
a representative collection of goods and services
market basket
a group of two or more people who related by birth, marriage, or adoption who live in the same housing unit
family
all people who live in the same housing unit, regardless of how they are related
household
the process by which rising wages cause higher prices, and higher prices cause higher wages
wage-price spiral
poverty threshold
the income level below which income is insufficient to support a family or household
Factors that contribute to poverty:
Race and ethnic origin
Type of family
Age
Residence
Causes of poverty
lack of education location racial and gender discrimination economic shifts shifts in family structure
a worker who wants a job but has given up looking for one
discouraged worker
