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ISS > Econ. Basics > Flashcards

Econ. Basics Flashcards

1
Q

needs & wants

A

necessities & luxuries

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2
Q

economic thinking

A

the wise use of available resources

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3
Q

scarcity

A

the world is finite, limited. availability of sources that r in demand = scarce. main problem of economics.

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4
Q

opportunity cost

A

short/long term negative effects of a decision. value lost.

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5
Q

opportunity benefit

A

short/long term positive effects of a decision. value gained.

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6
Q

economic theorem

A

If needs & wants r unlimited & resources r limited, then the wise use of available resources = necessary for success

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7
Q

3 Basic Economic Q’s

A

What 2 Produce, How 2 Produce, & For Whom 2 Produce

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8
Q

What 2 Produce

A

use readily available resources

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9
Q

How 2 Produce

A

quality or quantity?

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10
Q

For Whom to Produce

A

demographic

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11
Q

4 Econ. Systems

A

traditional, market, command, mixed

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12
Q

traditional economy

A

bartering breeds inconsistent success

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13
Q

market economy

A

hypothetical. not influenced by gov’t, but instead by greed. demand driven by consumers.

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14
Q

command economy

A

do exist. complete & dictatorial. gov’t controls 3 Q’s

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15
Q

mixed economy

A

blend of command & market

may have gov’t interference:

to promote fair competition

to protect national security

to promote the well-being of the state

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16
Q

4 Factors of Production

A

land, labor, capital, management

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17
Q

land

A

space to produce; literal/figurative

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18
Q

literal land

A

farmers, industrial

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19
Q

figurative land

A

laboratory access, cyberspace

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20
Q

labor

A

manufactring. quantitative/qualitative

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21
Q

capital (4 factors)

A

liquidating assets; fuel 4 production

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22
Q

management

A

hiring other managers (efficient & loyal, responsible 4 success)

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23
Q

entrepeneur

A

self-starter in business

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24
Q

what 2 categories r combined?

A

4 factors of production & 4 levels of industry

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25
Q

4 levels of industry

A

raw material extraction, manufacturing, distribution, retail

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26
Q

raw material extraction

A

getting the basic material from which a product is made

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27
Q

manufacturing

A

process of taking raw material & finishing it into a product; sometimes multistage

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28
Q

distribution

A

trucks, planes, trains. refrigerated/armored trucks. allocating finished products to their retail destinations

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29
Q

retail

A

product meets consumer. retailers buy in bulk w/ discount rate & add their own cost (Costco, BJ’s, etc.)

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30
Q

goods & services

A

an action/product exchanged for value intended to satisfy your needs & wants. value determined by price determined by economic system being studied

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31
Q

money (currency)

A

medium of exchange that everyone agrees on the value of

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32
Q

allocation

A

the distribution of resources to where they need to go

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33
Q

assets

A

things of value (gives advantage in survival & social); capital/abstract

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34
Q

capital assets

A

cash or things worth cash

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35
Q

abstract assets

A

poise, charisma

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36
Q

expenditures

A

Payment of cash or cash-equivalent for goods or services

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37
Q

cottage industry

A

qualitative. can do every stage urself. master craftspeople. smaller demographic but loyal. often labor-intensive

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38
Q

labor-intensive

A

more humans than machines

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39
Q

mass production

A

quantitative. uses “specialized” workers on an assembly line. capital-intensive.

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40
Q

capital-intensive

A

low cost, high revenue. machines > humans.

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41
Q

Economic Styles

A

socialism, communism, capitalism

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42
Q

socialism

A

state can (& usually does) own industry & capital, altho private ownership allowed too.

students encouraged to get good education to get better careers.

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43
Q

communism

A

collective socialism.

“state” owns all industry & capital

“state” prohibits private property

“state” prohibits classism (gov’t is upper class)

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44
Q

capitalism

A

profit-seeking. based on private ownership. Americans have made search for profit into a moral, ethical code.

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45
Q

Law of Supply

A

microeconomic law stating that, all other factors being equal, as p of g/s increases, q offered by suppliers increases

As the price of a good increases, suppliers will attempt to maximize profits by increasing the quantity of the product sold.

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46
Q

law of demand

A

microeconomic law stating that, all other factors being equal, as price of g/s increases, consumer demand decreases

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47
Q

law of supply & demand

A

theories abt the interaction b/w supply of a g/s & demand 4 it.

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48
Q

equilibrium

A

when supply & demand r equal (when the supply & demand functions intersect). @ this point, allocation of goods is @ its most efficient cuz amount of goods being supplied = amount of goods being demanded.

results: affordability & profitability

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49
Q

disequilibrium

A

excess supply or excess demand

quantity supply is not equal to quantity demand

50
Q

excess supply

A

if p too high, ppl don’t want it. surplus.

51
Q

excess demand

A

p too low, too many ppl want it & not enough supply. deficiit.

52
Q

surplus

A

the amount of an asset/resource tht exceeds the portion that is used

demand < supply

53
Q

deficit

A

the amount by which expenses exceed income/costs outstrip revenues

supply < demand

54
Q

profit

A

occurs when the amount of revenue gained from a business activity exceeds the expenses, costs, & taxes needed

55
Q

liquidate

A

to convert assets in2 cash/equivalents by selling them in the open market

56
Q

standard of living

A

the level of wlth, comfort, material goods, & necessities available 2 a certain socioeconomic class in a certain geographic area

57
Q

inflation

A

a rise in the average price of goods and services in the macroeconomy

58
Q

deflation

A

reduction of the general level of prices in an economy

59
Q

gross domestic product (GDP)

A

the total dollar value of all final products (g/s) [avoids double-counting] produced in 1 country in 1 year. measures spending to measure well-being.

60
Q

nominal GDP

A

literal count

61
Q

real GDP

A

deflated & more realistic since previous year’s inflation factored out

62
Q

GDP per capita

A

average amount produced per person in a country (GDP/population). used 2 measure well-being per person.

63
Q

GDP categories (expenditure approaches)

A

personal consumption, business invenstment, trade (imports/exports), gov’t expenditures

64
Q

personal consumption

A

largest categories in most market & mixed economies; US has largest

65
Q

business investment/expenditures

A

growth spending; buying land/rights

measures the improvement costs encountered by companies in a nation in a year

66
Q

trade (imports/exports)

A

I > Ex = deficit

I < Ex = surplus

US has had trade deficit since early 1970s

67
Q

gov’t expenditures

A

most of all the gov’ts income is generated by tax revenue. 40% of world’s defense spending. mostly Health & Human Services and Social Security –> socialist stuff in capitalist country.

2nd largest GDP category

68
Q

GDP flaws

A

can’t always accurately measure standard of living w/ GDP/capita.

doesn’t consider built-in quality of products(cottage industry stuff), GDP/capita, leisure time (time not working - can be therapeutic or just bad), houshold work (organization must be regular or ability to work will be affected), how goods r distributed

not all countries can pay for their own census or count

69
Q

economy of scale

A

the greater the quantity of a good produced, the lower the per-unit fixed cost because these costs are shared over a larger number of goods.

70
Q

vertical monopoly

A

dominates 2 or more levels of industry

71
Q

horizontal monopoly

A

dominates 1 level of industry

72
Q

price elasticity of demand

A

a measure of the responsiveness of the quantity demanded of a good to a change in its price. the range/margin of fluctation of price for a product before demand is affected. % change in demand/% change in price. <1 = inelastic. >1 = elastic.

73
Q

price ceiling

A

the point where demand starts to fall (when price too high)

74
Q

price floor

A

the point where price can go no lower before no profit

75
Q

marginal utility

A

The additional satisfaction a consumer gains from consuming one more unit of a good or service. Marginal utility is an important economic concept because economists use it to determine how much of an item a consumer will buy. Positive marginal utility is when the consumption of an additional item increases the total utility. Negative marginal utility is when the consumption of an additional item decreases the total utility.

76
Q

diminished marginal utility

A

as a person increases consumption of a product - while keeping consumption of other products constant - there is a decline in the marginal utility that person derives from consuming each additional unit of that product.

77
Q

microeconomics

A

individual (persons/businesses/entities).

78
Q

macroeconomics

A

whole economies. all microeconomies interact - whole of microec interactions

79
Q

price gouging

A

when someone raises the price of a g/s cuz they know it’s othrwise limited/nonexistent

80
Q

staple products

A

consumers tend to buy these necessities regardless of signficant price changes

grocery - milk, bread, meats

household - gas, water, energy

81
Q

gourmet food

A

often inelastic. may require p increase/decrease 50% to create any perceptible changes in consumers’ behavior. these types of consumers not as value-concious as regular shoppers.

82
Q

unitary elasticity

A

in economics, situation where a change in 1 factor causes an equal/proportional change in another factor.

83
Q

determinants of demand

A

income, substitute products, complementary products, time period (attitude), limited liability, unlimited liability

84
Q

income (determinants of demand)

A

limits or expands ur purchase power

85
Q

substitute products

A

uncommonly purchased products are on sale or commonly purchased ones are out of stock

replaces a predictable purchase with a more fortuitous one

86
Q

complementary products

A

accompanies (at least in thought) the purchase of another

demand for these may fall if associated products are out of stock or discontinued

Ex: pb & j, mac & cheese, french fries & ketchup

87
Q

time period (attitude)

A

1) yearly traditions - holidays & vacations
2) unplanned events - recession, convict escape

rationalizes the unique or ideal nature of the moment or occasion

88
Q

limited liability

A

concept that shareholders of a business r responsible only 4 its debts up 2 the amount they invest in the business. if corporation goes bankrupt/sued, the stockholders’ other assets can’t be used 2 pay the debts of the business

89
Q

unlimited liability

A

the ocncept that a stockholder’s personal assets can be used 2 pay bills of the business

90
Q

disparity

A

the exaggerated difference between 2 levels of income & society

91
Q

poverty

A

income < needs

income can’t meet threshold of needs

92
Q

wealth

A

an abundance of income after obligations

93
Q

net worth

A

income after obligations

94
Q

income

A

Money that an individual or business receives in exchange for providing a good or service or through investing capital.

95
Q

debts

A

An amount of money borrowed by one party from another.A debt arrangement gives the borrowing party permission to borrow money under the condition that it is to be paid back at a later date, usually with interest.

96
Q

demographics

A

Studies of a population based on factors such as age, race, sex, etc.

Segmenting a population into demographics allows companies to assess the size of a potential market and also to see whether its products and services are reaching that company’s most important consumers.

97
Q

budget

A

An estimation of the revenue and expenses over a specified future period of time.

98
Q

structural unemployment

A

long term. serious.

unemployment that comes from there being an absence of demand for the workers that are available

causes:

  1. have wrong skills
  2. geographically separated (can’t move)
  3. changes in technology: typewriter –> computer
  4. changes in taste: bagpipes unpopular
99
Q

cyclical unemployment/demand deficiency unemployment

A

results from too low a level of aggregate demand

low demand for g/s –> low demand for labor –> derived demand

occurs when the unemployment rate moves in the opposite direction as the GDP growth rate. So when GDP growth is small (or negative) unemployment is high. Getting laid off due to a recession is the classic case of cyclical unemployment

100
Q

seasonal unemployment

A

unemployment due to changes in the season - such as a lack of demand for department store Santa Clauses in January. Seasonal unemployment is a form of structural unemployment, as the structure of the economy changes from month to month.

short term & not concern.

101
Q

frictional unemployment

A

unemployment that comes from people moving between jobs, careers, and locations.

b/w 3-5% of unmplymnt = frictional

not much of a concern.

causes:

  1. ppl entring workforce from school
  2. ppl re-entering workforce after having children
  3. ppl changing employrs due to quitting or getting fired
  4. changing careers due to changing interests
  5. People moving to a new city and being unemployed when they arrive.
102
Q

poverty thresholds

A

one person under age 65 - 11,945 –> one person 65 or older - 11,011 (less cuz have free programs)

two people under age 65 with no children –> 1 child = 15,374 –> 15,825 (having a younger child costs more)

nine people or more (no children) - 50,849 –> nine ppl or more (8+ children) 44, 387 (8+ children likely to have older children = cost less)

103
Q

objects used as money before metals

A

salt, stone, glass beads, human skulls

104
Q

date & place for 1st known standard currency

A

7th century BCE (600’s)

Lydia, Anatolian Peninsula, Asia Minor (now Turkey)

105
Q

4 characteristics of money

A

scarce (in demand)

easily divisible (gold = soft)

portable (goldsmiths let ppl deposit & borrow gold)

indestructable

106
Q

what 2 characteristics did gold satisfy?

A

scarce & easily divisible

107
Q

who were the first bankers?

A

Goldsmiths frequently used receipts to make loans and gather interest from repayment.

108
Q

fractional reserve banking

A

A banking system in which only a fraction of bank deposits are backed by actual cash-on-hand and are available for withdrawal. This is done to expand the economy by freeing up capital that can be loaned out to other parties.

109
Q

how were US dollars gradually separated from gold?

A

1929 - Stock Market Crash

1930’s - “Gold Reserve Act” - illegal to use gold as currency

1971 - Nixon - gold link cut for good

110
Q

what is the US dollar backed by today?

A

bank assets & faith in gov’t’s promise of the value of our dollar

111
Q

multiple expansions of bank deposits

A

modern version of fractional reserve banking

M1 - coins & currency + checkbook $ (basic money supply)

M2 - M1 + Savings Accounts

M3 - M2 + Large Long Term Deposits (have safety deposits so u can’t take $ out)

Current M1 = $2.2 trillion (basic money supply)

Current M2 - $11 trillion

112
Q

demanders & suppliers

A

consumers & producers

113
Q

demand schedule

A

this kind of chart can track the willingness and ability of consumers to purchase products at variable prices

114
Q

demand curve

A

A mathematical curve, drawn on a graph, that represents what the demand for a commodity would be if its price ranged anywhere from zero to infinity.

115
Q

supply curve

A

graphic representation of the relationship between product price and quantity of product that a seller is willing and able to supply.

116
Q

always on the vertical axis

A

price

117
Q

always on the horizontal axis

A

quantity

118
Q

why does the GDP not always accurately measrue the standard of living?

A

If 2 countries have the same area, population, or GDP, may have drastically diff geography tht may affect their spending

119
Q

aggregate demand

A

the total demand for final goods and services in the economy at a given time and price level

120
Q

derived demand

A

a demand for a commodity, service, etc., that is a consequence of the demand for something else.

ex: demand for labor cuz of demand for g/s

ISS (14 decks)

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