Chapter 2 Flashcards
what is economics?
the study of how society chooses to employ resources to produce goods and services and distribute them among various competing groups and individuals
what is microeconomics?
looks at the behaviour of people and organizations in particular markets
what is macroeconomics?
looks at the operation of an economy as a whole
what is resource development?
the study of how to increase resources and the creation of the conditions that will make better use of those resources
what is capitalism?
when all or most of the factors of production and distribution is owned privately
what is communism?
an economic system where the government decides what will be produced and who will consume the results of production
what is socialism?
some free market and some government allocation
what kind of economic system do most countries have?
mixed economy
how does a free market work?
many buyers and sellers trading freely determine the prices at which they will exchange goods and services
how are prices determined in a free market?
the constant interplay between supply and demand determines the equilibrium price at which a transaction will occur
what is supply?
the quantity of products that manufacturers or owners are willing to sell at different prices at a specific time
what is demand?
the quantity of products that people are willing to buy at different prices at a specific time
what is the equilibrium point?
the point where quantity demanded and quantity supplied meet
what determines the market price?
the equilibrium point
name the four types of competition/ market structure?
perfect competition
monopolistic competition
oligopoly
monopoly
what is perfect competition?
when there are many sellers in a market and no seller is large enough dictate the price of the product and the product is identical
what is an oligopoly?
when a few sellers dominate a market and there is significant investment needed to enter the market
what is a monopoly?
when there is only one seller for a good or service and that one seller controls the total supply and price of the product
what is a monopolistic competition?
when a large number of sellers produce goods that are similar but buyers perceive them as different
what are 3 benefit of free markets?
creation of wealth
allows open competition
brought prosperity
what are 4 limitations to the free market?
inequality
poverty
unemployment
greed has dictated how some do business
what is socialism?
an economic system based on the premise that some if not most basic businesses should be owned by the government
what are 4 benefits of socialism?
focus on social equality
workers get longer vacation
workers work less hours
workers enjoy better benifits
what are 4 limitations of socialism?
does not motivate business people to work hard
does not motivate business people to invest and create more wealth
less innovation
lack of individual incentive
what is communism?
it is a political and economic system in which the government makes almost all the economic decisions and owns almost all the major factors of production
what are 5 limitations of communism?
government has no data on supply and demand which lead to shortages or surplus in production
no motivation for business people to work hard
lack of incentives
will fall on economic hard ship
lack of goods and services that are readily available in other countries
what is a free market?
exists when the market largely determines what goods and services are produced
what is a communist economy?
exists when the government largely decides what goods and services are produced, who gets them and how the economy grows
what is a mixed Economy?
exists where some allocation of resources are made by the government and some by the market
name the seven key economic indicators of the Canadian economy?
GDP (gross domestic economy)
unemployment rate
housing market
commodity prices
stock market and if people are buying stocks
price indexes
decrease in productivity
what is gross domestic product (GDP)?
the total goods and services produced in a country by the economy in a given year
what is the major influence on the growth of the GDP?
the productivity of the workforce
when a country produces more how will that effect the GDP?
it will raise the GDP
when a country produces less how will that effect the GDP?
it will lower the GDP
what will a strong economy and high GDP lead to?
higher standard of living
what does standard of living relate to the economy?
the amount of goods and services people can buy with the money they have
what does quality of life relate to the economy
the general well-being of a society in terms of political freedom, a clean natural environment, education, health care, safety and everything else that leads to satisfaction and joy
how is productivity measured in the economy?
by dividing the total output of goods and services of a given period by the total hours of labour required to produce them?
higher productivity will lead to lower what?
lower costs for producers to produce those goods and lower costs for consumers to purchase them
what qualifications do you need to be part of the unemployment rate?
fifteen years and older and actively seeking work but in able to find it
what are the four types of unemployment?
frictional unemployment
structural unemployment
cyclical unemployment
seasonal unemployment
what is frictional unemployment?
frictional unemployment refers to people who have quit work due to not liking the job, the boss, or the working conditions and who haven’t found a job yet
what is structural unemployment?
structural unemployment refers to unemployment due to restructuring of a firm or a mismatch between the skills of job seekers and the requirements of available jobs
what is cyclical unemployment?
cyclical unemployment occurs because of a recession or a similar downturn in the business cycle
what is seasonal unemployment?
seasonal unemployment occurs where demand for labour varies over the year
what is the consumer price index (CPI)?
the CPI index is what economists use to measure the pace of inflation or deflation by determining how much a basket of good and services cost for an average family
what makes up a basket of goods?
food
transport
clothing
shelter
what is inflation?
the general rise of the prices of goods and services overtime
what is disinflation?
the condition where the price of goods and service increases are slowing (the inflation rate is declining)
what is deflation?
the prices of goods and services are actually declining. this occurs when a country produces so many goods that people cannot afford to by them all (to few dollars chasing to many go prods)
what is stagflation?
occurs when the economy is slowing but prices are increasing regardless
what are business cycles?
also known as economic cycles are the periodic rises and falls that occur in economies over time
what is an economic boom?
occurs when the economy is doing well
what is a recession?
a recession is when two or more consecutive quarters of decline in the GDP (prices fall, people purchase fewer products, businesses fail, high unemployment rate, drop in living standard)
what is a depression?
a severe recession usually accompanied by deflation
what is an economic recovery?
occurs when the economy stabilizes and starts to grow
