Class 2 Lecture: Planning and Economics Flashcards
Planning and Economics along with important defs from this lecture
What is the Invisible Hand Theory? / EX?
As people improve their own situation in life, they help the economy prosper through the production of goods, services, and ideas. Farmer earns money selling crops and hires others to produce more, the community gets more food and jobs.
What is Capitalism? Country EX?
All or most of the land, factories, and stores are owned by individuals, not the government, and operated for profit. USA, ENG, AUS, CANADA.
What is State Capitalism? EX?
When the state, rather than private owners, run some of the businesses. CHINA, RUSSIA
Capitalism’s 4 Rights?
- The right to own private property
- The right to own a business and keep all that business’s profits.
- The right to freedom of competition.
- The right to freedom of Choice.
In a capitalist System, the ________ determines the distribution of resources.
market
Supply curve indicates…
The quantities of products businesses are willing to sell at different prices. (upward curve)
Demand Curve indicates…
The quantities of products consumers are willing to buy at different prices. (downward curve)
Equilibrium point (Market Price)
Determined by supply and demand, this is the negotiated price. (On a graph the intersecting point between the two curves)
What are the Four degrees of Competition?
- Perfect Competition
- Monopolistic Competition
- Oligopoly
- Monopoly
What is Perfect Competition?
Under perfect competition, there are many buyers and sellers, and prices reflect supply and demand. (used as a measure of the efficacy of other markets.)
What is Monopolistic competition?
Monopolistic competition exists when many companies offer competing products or services that are similar, but not perfect, substitutes. (Nike vs. Addidas).
What is an Oligopoly?
A small number of firms that control the market. None of these firms can keep the other(s) from having significant influence over the market. ( Verizon, AT&T, Sprint, T-Mobile).
What is a monopoly?
A monopoly is a market structure where a single seller or producer assumes a dominant position in an industry or sector.
EX: Amazon (maybe), Comcast.
What are the Two Major systems in an economy?
Free-Market and Command Economies
What is a Free Market Economy?
The market largely determines what goods and services are produced, who gets them, and how the economy grows.
What is a Command Economy?
The government largely determines what goods and services are produced, who gets them, and how the economy will grow
What is a Mixed Economy?
Some allocation of resources is made by the market and some by the government. Most Countries have a mix of economic systems.
What is GDP?
Gross Domestic Product (GDP) – Total value of final goods and services produced in a country in a given year.
What is Inflation?
The general rise in the prices of goods and services over time.
What is Deflation?
Deflation – Prices are declining because too few dollars are chasing too many goods.
What is Consumer Price Index(CPI)?
Monthly statistics that measure the pace of inflation or deflation. (The government computes the costs of goods and services)
____ Is the total value of final goods and services produced in a country in a given year
GDP
What is a Business Cycle and what are the stages it goes through?
The periodic rises and falls occur in economies over time.
1. Economic Boom
2. Recession –decline in the GDP.
3. Depression – A severe recession.
4. Recovery – When the economy stabilizes and starts to grow. This leads to an Economic Boom.
What is Fiscal Policy?
The federal government’s efforts to keep the economy stable by increasing or decreasing taxes or government spending
What are the tools of Fiscal Policy?
Taxing, Government Spending.
What is Monetary Policy?
The management of the money supply and interest rates by the Federal Reserve Bank (the Fed). The Fed’s most visible role is increasing and lowering interest rates.
Economy boom = Fed increase rates
Economy decline = decrease
manage the supply of money in a country’s economy
National Deficits?
The amount of money the federal government spends beyond what it gathers in taxes
National Debt?
The sum of government deficits over time
National Surplus?
When the government takes in more than it spends.
Adam Smith was the writer of?
(Inquiry into the Nature and Causes of the) Wealth of Nations.
Adam Smith believed…
- Freedom was vital to any economy’s survival.
- Freedom to own land or property and the right to keep the profits of a business are essential.
- People will work hard if they believe they will be rewarded.
Resource Development
The study of how to increase resources and create conditions that will make better use of them.
_____ is the study of how a society employs its limited resources to produce goods and services and how it distributes them among competing groups and individuals.
Economics
Macroeconomics?
Concentrates on the operation of a nation’s economy as a whole.
MicroEconomics
Concentrates on the behavior of people and organizations in markets for particular products or services.
Asset
: Items (tangible or intangible) that have
value (probable future economic benefits).
1. In an economic sense, your knowledge, skills, & abilities are assets.
2. In your career, you will take your knowledge, skills, & abilities to the market
Why did Segway Fail? (Focus more on First Mover)
The product was not a solution. Expectations were too high. no real sense of which market they were trying to reach. Regulation, they did not think of how it would break laws for sidewalks in many countries.
Why did Hoverboards Succeed? (Fast Follower)
A clear target for a younger audience, cheaper, did not fail regulation test, Better media/pr (in part due to social media), no expectations.
Areas of Management
Marketing, Production, Finance, Administrative
A good Marketer …
Know your customers and determine how to best serve them
(GOOD ) Production is…
Build quality products at the lowest possible cost.
(The creation of value or wealth by producing goods and services)
Finance …
Arrange for the tools and money necessary to meet the goals of the company
regarding the management, creation, and study of money and investments.
Administrative
Determine who the company is and what
it wants to accomplish
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Uncertainty
Not knowing the market will respond
Risk
Damage Associated with bad outcomes
A business owner is a shareholder or stakeholder?
Shareholder
Citizens, consumers, employees, and business owners are all ____
Stakeholders
Competition to be a part of exchanges results in ___
- Pressure for lower prices
- Pressure for newer / better products
- Pressure for more efficient ways to do things
An increase or decrease in government regulations has a(n) ____ effect on business success due to the costs of adhering to the regulations.
Economic
Why did Thomas Malthus believe that population growth would surpass the available resources?
Fast population growth seemed to surpass the growth of the food supply.
The supply concept refers to the relationship between the quantity of products produced and price. If the market price of a product increases, quantity supplied will ______.
Increase
The percentage of the population who are included in the standard unemployment rate and those who are underemployed, discouraged, and have looked for a job in the past year are included in the:
real unemployment rate
What are the four types of unemployment?
frictional, seasonal, structural, cyclical
One of the most damaging economic phenomena is a sustained high rate of inflation. That is why economists and the Federal Reserve closely watch:
Price Index
GDP?
Gross domestic product = monetary measure of the market value of all the final goods and services produced in a specific time period by a country or countries
Mary worked for a GM factory in Detroit all her life. Unfortunately, when GM closed the plant because of restructuring, she could not find any jobs in the automotive industry in or around Detroit. Mary would be counted as an example of:
structural unemployment
