Final Exam Flashcards by Te Rem

Monetary value of all final goods, services, and structures produced within a country’s national borders during a one year period.

Gross Domestic product (GDP)

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Basic requirement for survival, including food, clothing, and shelter.

Need

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Something we would like to have but is not necessary for survival.

Want

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Fundamental economic problem facing all societies resulting from a combination of scarce resources and people’s virtually unlimited needs and wants

Scarcity

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Cost of the next best alternative use of money, time, or resources, when one choice is made rather than another.

Opportunity cost

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A measure of the amount of goods and services produced within a given amount of resources in a specific period of time.

Productivity

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Why do societies face scarcity?

Because people are never satisfied and there are limited resources

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What are the 3 choices faced by all societies?

What to produce
How to produce
For Whom to produce

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What are the four factors of production?

Land
Capital
Labor
Entrepreneurship

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Forced common ownership of factors of production

Collectivization

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Economy system with a central authority that makes most of the major economic decisions

Command Economy

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Economic and political system in which factors of production are collectively owned-and directed by the state; classless in which everyone works for the common good.

Communism

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Economic system in which supply, demand, and the price system help people allocate resources to make the WHAT, HOW, and FOR WHOM to produce decisions.

Market Economy

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Conversion of state-owned factories and other property to private ownership

Privatization

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Economic system in which the allocation of scarce resources is the result of ritual, habit, or custom.

Traditional Economy

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Why do mixed economies exist?

a mixed economy is needed to accommodate for the diversity of the real world.

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Who benefit from a mixed economy?

Poor People

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How are the economies of Chile and South Korea connected?

Chile and South Korea trade because Chile has many resources for production and Korea is able to use the resources because its economy is indstrial.

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Choose one type of economy and explain its characteristics with examples. Discuss advantages and disadvantages. (Command economy)

Command Economy: where the government runs every aspect of the economy and individuals have no say

Examples: North Korea, Cuba, former Soviet Union.

Advantages: Quick decision making, faster adjustments, and focus of common welfare.

Disadvantages: limited consumer choice in terms of product and services, state owns all land, and no individual freedom in economy

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Combination of quantities that someone would be willing and able to buy over a range of possible prices at a given moment.

Demand

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Listing showing the quantity demanded at all possible prices that might prevail in the market at a given time

Demand Schedule

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Decrease in additional satisfaction or usefulness as additional units of a products are acquired

Diminishing Marginal Utility

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A measure of responsiveness a dependent variable, such as quantity demanded or supplies, responds in an independent variable change such as price.

Elasticity

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Rule stating that more will be demanded at lower prices and less at higher prices

Law of Demand

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Demand curve that shows the quantities demanded

Market Demand Curve

Competing products that can be used in place of one another; an increase in the price of one increases the demand for the other.

Substitutes

Products that increase the use of other products; an increase in the price of one reduces the demand for both

Complements

What are the determinants of demand elasticity?

1. Can the purchase be delayed? 2. Are adequate substitute available? 3. Does the purchase use a large portion of income?

What is the relationship between price and quantity demanded?

As the price increases, quantity demanded decreases and vice versa (inverse relationship)

Type of elasticity in which a change in the independent variable (usually price) results in a larger change in the dependent variable (usually quantity demanded or supplied).

Elastic

The case of demand elasticity where the percentage change in the independent variable (usually price) causes a less than proportionate change in the dependent variable (usually quantity demanded or supplied).

Inelastic

Elasticity where a change in the independent variable (usually price) generates a proportional change of the dependent variable (quantity demanded or supplied.

Unit elastic

How do economists use the production possibilities curve to find the best price for a product?

They find the best prices by locating the price points that lie on the curve line, anything outside of it is inefficient.

What happens to the demand curve when consumer income changes?

The curve shifts right when the consumer income increases and it shifts left when consumer income decreases

production level where total cost equals total revenue

Break-even point

Cost of production that do not change when output changes

Fixed Cost

principle that more will be offered for sale at higher prices than at lower prices.

Law of supply

graphic portrayal showing how a change in the amount of a single variable input affects total output.

Production Function

Amount of a product a producer or seller would be willing to offer for sale at all possible prices in a market at a given point in time

Supply

production cost that varies as output changes; labor, energy, raw materials

Variable Costs

What are the 8 causes for changes in Quantity Supplied?

1. Cost of Resources 2. Productivity 3. Technology 4. Taxes 5. Subsidies 6. Government Regulations 7. Number of Sellers 8. Expectations

Why is the Production Function important?

Because it models the relationship between inputs and outputs, helping businesses understand and optimize production.

What are the 3 stages of production?

Increasing Marginal Returns Decreasing Marginal Returns Negative Marginal Returns

How does cost of resources affect supply?

The more the resources cost, the less supply there is and vice versa.

Supply Curve vs. Demand Curve

The demand curve shows the relationship between the price of a product and the quantity consumers are willing to buy, while the supply curve shows the relationship between the price of a product and the quantity producers are willing to supply. The demand curve generally slopes downwards, indicating that consumers tend to demand less of a product as its price increases. The supply curve generally slopes upwards, indicating that producers tend to supply more of a product as its price increases

Price where quantity supplied equals quantity demanded

Equilibrium Price

Quantity of output supplied that is equal to the quantity demanded at the equilibrium price.

Equilibrium Quantity

The highest legal price that can be charged for a product.

Price Ceiling

The lowest legal price that can be paid for a product

Price floor

When quantity supplied is less than quantity demanded at a given price

Shortage

When quantity supplied is greater than quantity demanded at a given price

Surplus

What are the advantages of price

Neutrality - doesn’t favor buyer or seller Flexibility - never fixed/can change Familiarity - known and easy to understand Efficiency - no cost of administration to find prices

What are the 2 goals of price ceilings?

To protect buyers from paying overly high prices. To save resources for other needs, such as war.

What are the 2 goals of price floors?

To protect businesses during times of difficulty. To stabilize prices and incomes from certain businesses.

How do prices help allocate resources between markets?

By signaling to producers and consumers what goods and services are in high demand and what resources are scarce. Prices adjust accordingly, and resources are allocated to where they are most valued.

How do surplus and shortage help establish the equilibrium price?

When price is too high, the surplus tends to bring down the price. When price is too low, the shortage tend to bring the price up. This results in a shift towards the equilibrium price.

Firm with four or more businesses making unrelated products, with no single business responsibility for a majority of its sales.

Conglomerate

Business investment that involves renting or leasing another successful business model

Franchise

Measure of business profits determined by subtracting all expenses, including taxes from revenues

Net Income

Economic institution that operates like a business but does not seek financial gain

Nonprofit Organization

A requirement that an owner is personally and fully responsible for all losses and debts of a business; applies to proprietorships and general partnerships.

Unlimited liability

What are the 6 reasons for a merge?

Faster Growth Synergy - greater affect from combination Economies of scale - more profitable Diversification Elimination of rivals Change or loss of Corporate identity

What is the relationship between dividend and stockholders?

Dividend is what a company pays its stockholders

Unincorporated business owned and run by a single person who has rights to all profits and unlimited liability for all debts of the firm; most common form of business organization in the United States.

Sole Proprietorship

Unincorporated business owned and operated by two or more people who share the profits and have unlimited liability for the debts and obligations to the firm

Partnership

Form of business organization recognized by law as a separate legal entity with all the rights and responsibilities of an individual, including the right to buy and sell property, enter into legal contracts, and to sue and be sued

Corporation

Non-institutionalized part of the population, aged 16 and over either working or looking for a job.

Civilian Labor Force

Process of negotiation between union and management representatives over pay, benefits, and job related matters

Collective Bargaining

Seemingly invisible barrier hindering advancement of women and minorities in a white male dominated organization.

Glass Ceiling

Explanation stating that the supply and demand for a worker’s skills and services determine the wage or salary.

Market Theory of Wage Determination

Theory that employers are willing to pay more for people with certificates, diplomas, degrees, and other indicators of superior ability

Signaling Theory

A union organized work stoppage designed to gain concessions from an employer

Strike

What are the three causes of Pay Discrimination?

1. Human Capital Differences - Men and women have differing skill set and education level 2. Gender and Occupation - Uneven distribution of men and women among various jobs/occupations 3. Discrimination - sexism

When was the first attempt to organize labor in America? And Who took part and did what?

In 1778, when printers joined together in New York to demand higher pay.

How many were unemployed in the Great Depression?

One in four workers were without jobs.

What are the 4 wage determinators?

Unskilled labor Semi-skilled labor Skilled labor Professional Labor

List the 7 ways of resolving disputes

1. Collective Bargaining 2. Mediation 3. Arbitration 4. Fact-Finding 5. Injuntion 6. Seizure 7. Presidential Intervention

The process of resolving a dispute by bringing in a neutral third party to help both sides reach a compromise.

Mediation

An agreement by two parties to place a dispute before a third party for a binding settlement.

Arbitration

An agreement between a union and management to have a neutral third party collect facts about a dispute and present nonbinding recommendations.

Fact-Finding

A court order issued to prevent a company or union from taking or not taking action during a labor dispute.

Injunction

Temporary Government take over of a company to keep it running during a labor dispute

Seizure

The president of the United States may enter a labor-management dispute by publicly appealing to both parties to resolve their differences.

Presidential Intervention

Regular ups and downs of real GDP

Business Cycles

Index used to measure price changes for a market basket of frequently used consumer items.

Consumer Price Index

A state of the economy with large numbers of unemployed, declining real incomes, overcapacity in manufacturing plants, and general economic hardship

Depression

Sustained rise in the general level of prices of goods and services

Inflation

Index used to measure prices received by domestic producers

Producer Price Index

Working less than one hour per week for pay or profit in a non family owned business, while being available.

Unemployed

How do you calculate Unemployment rate?

1. Number of Unemployed Persons divided by Civilian Labor Force 2. Convert to percentage

Why do creditors prefer creeping inflation?

Because they are less noticeable and gives them more profits

What are the advantages of 30-year loans?

Less monthly payments More financial flexibility

Unemployment caused by workers changing jobs or waiting to go to new ones

Frictional unemployment

Unemployment caused by a fundamental change in the economy that reduces the demand for some workers

Structural Unemployment

Unemployment caused by technological developments or automation that make some workers’’ skills obselete

Technological Unemployment

Unemployment directly related to swings in the business cycle

Cyclical Unemployment

Unemployment caused by annual changes in the weather or other conditions that prevail at certain times of the year.

Seasonal Unemployment

Advantages and disadvantages of Sole Proprietorships

Advantages: 1. Easy to start 2. Easy to manage 3. Owner keeps all the profits 4. No taxes Disadvantages: 1. Unlimited Liability 2. Difficulty raising financial capital (money) 3. Small Size 4. Limited managerial experience

Advantages and disadvantages of partnerships?

Advantages: 1. Easy to start up 2. Easy to manage 3. No taxes 4. Easier to raise Financial capital 5. Larger size Disadvantages: 1. Each partner fully responsible for each other 2. limited life like sole proprietorship 3. Potential conflicts between partners

Advantages and disadvantages of corporations?

Advantages: 1. Easy to raise financial capital (money) 2. Limited liability 3. Good management 4. Unlimited life Disadvantages 1. taxes 2. Difficulty of getting a charter (to start) 3. Owners have little say 4. Government Regulation

Final Exam Flashcards

(100 cards)