61 Cards in this Set
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economics
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the study of how to best allocate scarce resources among competing uses
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opportunity cost
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the next best desired good/service foregone to obtain the chosen good/service.
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scarce resources
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there is a limit to the amount of output that can be provided in a given time period with available resources and technology
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invisible hand
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market mechanism, marker prices and sales signals desired outputs
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central planning
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government decides not market
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gross domestic product
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total value of a final good/service produced by businesses within a nation's borders regardless of what country that business is based in
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gross national product
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total value of final goods/services produced by a nation's businesses regardless of where that production occurs
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nominal gdp
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value of gdp measured in current dollars
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real gdp
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inflation adjusted value of gdp or value of output measured in constant prices
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per capita gdp
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total gdp divided by total population
pop(1+total percent)to how many years
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business investment
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anything a business spends money on to purchase goods/services
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capital intensive
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production processes that use a high ratio of capital to labor inputs
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productivity
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output per unit of input, such as output per labor hour
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factor mobility
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reallocating resources from one industry to another
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technological advance
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finding new ways and better ways to produce goods/services
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optimal mix
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what society would like the mix of goods/services to be
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market mix
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real world. gov steps in when the 2 are far apart
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progressive tax
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tax rate rises as income rises
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regressive
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tax rate decreases as income rises
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factor market
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factors of production being bought + sold
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product market
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finished goods/services being bought + sold
-business can be sellers and buyers in this market
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demand
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the ability and willingness to buy specific quantities of a good at alternative prices in a given time period
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ceteris parabis
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the assumption that nothing else changes. hold all variables constant except for one.
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law of demand
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the quantity of a good demanded in a given time period increases as its price galls
-negative and inverse reaction
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market demand curve
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sum of all individual demand curves
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supply
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the ability and willingness to sell specific quantities of a good at alternative prices in a given time period
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law of supply
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the quantity of a good supplied in a given time period increases as its price increases
-positive and direct relationship
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change is quanity supplied or quantity demanded is
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a movement along the curve
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change in supply or demand is
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shift in curve
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equilibrium
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supply and demnad meet. the same amount is being sold that is being bought
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scarcity
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not enough resources to satisfy desires of the economy. limits production so choices have to be made
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factors of production
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land, labor, capital, entrepreneurship
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land
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natural resources, minerals, water, oil, etc
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labor
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not just people but skills, abilities, knowledge, etc
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capital
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factories, equipment, machinery
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entrepreneurship
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management, ability, innovation
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laissez faire
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hands off
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3 basic questions economics tries to answer
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what to produce, how to produce, for whom to produce
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production possibilities curve
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describes the various output combinations that could be produced in a given time period with available resources and technology
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efficient mix of output
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maximum output of a good from resources used in production. every point on curve is being used efficiently.
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economic growth
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increase in output due to an expansion of production possibilities because of an increase in resource or better technology
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government failures
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might replace market failure but will leave us no better off and perhaps even worse. government intervention makes the market worse
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income transfers
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payment to individuals which no current goods/services are exchanged.
largest is social security
raises low income household out put from 1-3.4%
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economists measure output in
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monetary terms
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components of GDP
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household consumption, business investment, government purchases and services, net exports
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household consumption
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durable goods, non durable goods, services
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government spending
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federal, state, local, county
military, roads,
whatever resources used by the gov cant be used by the private sector
does not include income transfers
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net exports
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exports-imports=net exports
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why is america so productive
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we have an advantage in our factors of production due to WWII
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4 roles gov plays in economy
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to protect legal framework, consumers, labor, and environment
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market demand
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total quanities of a good or service people ar willing and able to buy at alternative prices in a given time period.
the sum of individual demands
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market supply
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total quantities of a good or service that sellers are willing and able to sell at alternative prices in a given time period
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market participants
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consumers, business firms, government, foreigners
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market goals of participants
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consumers-maximize utility
business firms-maximize profits
government-maximize social welfare
foreigners-maximize utility and/or profit
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5 determinants of demand
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taste, income, other goods, expectations, number of buyers
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taste
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desire for this and other goods
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income
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of the consumer
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expectations
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for income, prices, tastes
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6 determinants of supply
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technology, factor costs, other goods, taxes/subsidies, expectations, number of sellers
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surplus
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above the equilibrium
quantity supplied exceeds quantity demanded
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shortage
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below the equilibrium
quantity demanded exceeds the quantity supplied
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ECON 221: Exam 1