Flashcards in Principle of Economics Final Deck (42):
Factors of Production: Land/Labor/Capital
Land: Is where all of the natural resources used in making goods and services
Labor: Where a person does a task in making of the product
Capital: Any human made resource used to produce goods and services.
Production Possibilities Curve (PPC)
A graph that shows alternative ways to use an economy's resource.
Production Possibilities Frontier
Is the line in the PPG that shows the maximum possible output.
Law of Supply and Demand and the relationship to price and quantity
Is the backbone of a market economy. The quantity demanded is the amount of a product people are willing to buy at a certain price.
Elasticity of Supply and Demand: Perfect
On the graph, a straight vertical line exist halfway along quality and there is no demand.
Elasticity of Supply and Demand: Relative
On the both Inelastic and Elastic graph, Demand is decreasing. However Inelastic demand is decreasing sharply while Elastic is decreasing slowly.
Elasticity of Supply and Demand: Unitary
Is where Price of the item goes up and quantity decreases.
The relationship between future expectations and current supply/demand
People going to buy in their best interests. When the Price is down people tend to buy more. However when the price goes up, people buy it before the hike exists and demand decreases after the hike.
The difference between demand and supply curves
The Demand Curve slopes downward while the Supply Curve is slopes upward.
Difference between shift of the curve and movement along the curve.
Shift: Is where the curve makes a new line when demand and supply increases or decreases.
Movement is where a dot moves to a new position along the curve based on supply and demand.
Is the supply and demand equaled at equilibrium price.
Is the wage rate that produces neither excess supply or demand of workers in the labor market.
Shortage vs. Surplus
Surplus is more stuff being produced than at demand while Shortage is less stuff being produced than at demand.
Impact of government policy on supply and demand on relationship between minimum wage laws and equilibrium wage/price
If the Government increase wages, business may reduce workers or increase prices to remain competitive.
Impact of Government Policy on Supply and Demand on
Same idea as wages, it's below equilibrium housing is going to be less available nor above equilibrium. It needs to at the equilibrium point to be right.
Impact of Government Policy on Supply and Demand on price Floor vs. Price Ceiling
The Price floor is where the price of the item can't go any lower than the floor itself otherwise it would loss its value.
Price ceiling is where the price of the item can't go higher than the ceiling.
Impact of Government Policy on Supply and Demand on Rationing
The Government says what your limited to on certain products like a shortage of oil occurs which causes a black market which they attempt to sell oil at higher price.
Factors that influence Wage Levels
- Supply and Demand
- Ability to Pay
- Market Rates
- Government Regulations
Relationship between minimum wage laws and equilibrium wage/price
If the government increase wages, business may reduce workers or increase prices to remain competitive. However, if the Government lowers or doesn't change the minimum wage, then business don't make heavy changes.
Trends in wages/types of employment in the U.S.: white collar vs. blue collar jobs
Wages have steadily decreased in certain places
Blue Collar: Low wage jobs, typically manufacturing jobs.
White Collar: High wage jobs, typically office
How to calculate the unemployment rate?
Number of unemployed people divided by the labor force
Macroeconomic impact of high/low levels of unemployment?
Low unemployment: don't want 0% out of work
High unemployment: we don't want over 8%-10% out of work.
Just right at 4%
Full Employment vs. Underemployment vs. Discouraged Workers
Full Employment: People that are working full time
Underemployment: People aren't working full time
Discouraged Workers: Is someone that wants a job but has given up
What is the Poverty Line?
Is the level of income you need to take care minimum economic needs
Which Demographic groups more or less likely to live in poverty?
More: Black, Hispanics, Middle income and low income
Less: Whites, Asians, Rich people
What is the role of labor unions in wages historically and through collective bargaining/arbitration?
They led strikes demanding higher wages which they succeed, however they became corrupt which began their undoing which caused governments pass laws limiting unions.
- Collective Bargaining is a process which unions and companies meet to negotiate a new contract. These unions help fight questionable firings through grievance hearings.
- Arbitration is where a third party looks over the case and decides a decision for both sides.
Screening vs. Learning Effect in employment
Learning Effect: More you learn, the higher amount you get pay
Screening Effect: Is Number of jobs open but have a degree for that job.
Gender disparities in wages/employment
Based on Ethical and Racial prejudice since that White men get more pay than women, both white and minority color
What is Capital Deepening: the role of savings in increasing GDP
Is the process for increasing the amount of capital per worker which workers have more money to save.
Classical vs. Keynesian Economic Theory
Classical: Free Markets, People act in self interest causing prices to rise or fall so supply and demand return in equilibrium. Advocated by Adam Smith, David Ricardo, and Thomas Malthus.
Keynesian: He wanted governments to get out of the Great Depression and avoid all future economic crises.
Short Term: recover fast and economy can reestablish itself.
Long Term: Without significant investment we all dead.
Durable vs. Nondurable goods
Durable would last for a long time while Nondurable goods don't last for a long time.
Nominal vs. Real GDP
Nominal: Is current prices
Real: Constant changing prices
Stages of the Business Cycle
1. Expansion is a rise in the real GDP.
2. Peak is where the real GDP stops growing.
3. Contraction is economic decline in real GDP.
4. Trough is low point of the economy.
Difference between Recession and Depression
Recession is a prolong economic downturn for 6 straight months and unemployment rises 6-10%. Depression is the longer version of a Recession.
Intermediate vs. Final Goods and Services
Intermediate Goods are used for the production of the Final goods and services.
Aggregate Supply and Demand
Aggregate Supply is the total amount of goods and services in the economy available at all possible price levels.
Aggregate Demand is the amount of goods and services in the economy that will be purchased at all possible price levels.
Role of future expectations in current GDP
If GDP rising, more people are investing
If GDP decrease, more people aren't investing
What is Stagflation?
Is a decline in the Real GDP and inflation is increasing.
Federal Budget Process: Step 1
Federal Agencies send requests for money to the Office of Management and Budget (OMB)
Federal Budget Process: Step 2
The Office of Management and Budget works with the president to create a budget. In January or February, the President sends his proposed budget to Congress.
Federal Budget Process: Step 3
Congress makes changes to the budget and sends the revised version to the president.