econ final elzenga section 3 Flashcards
US Economy Divisions
Businesses; Households; Government
Factor Market
market in which households supply labor and other factors of production to businesses and are paid by businesses for doing so
Goods Market:
the market in which businesses produce goods and services and sell them to households and governments
Business:
private producing units in our society; decide what to produce, how much, and for whom based on its own self-interest and market incentives
Consumer Sovereignty
the consumer’s wishes determine what is produced
Forms of Business:
Sole Proprietorships, Partnerships, Corporations, Flexible purpose/benefit corporations
Households:
groups of individuals living together and making joint decisions; most powerful economic institution; ultimately control government and business
Externality:
the effect of a decision on a third party not taken into account by the decision maker
Roles of Government:
o Providing a stable set of institutions and rules
o Promoting effective and workable competition
o Correcting for externalities
o Ensuring economic stability and growth
o Providing public goods
o Adjusting for undesirable market results
Public good:
a good that if supplied to one person must be supplied to all and whose consumption by one individual does not prevent its consumption by another individual
Private good:
a good that, when consumed by one individual, cannot be consumed by another individual
Demerit goods or activities:
goods or activities that government believes are bad for people even though they choose to use the goods or engage in the activities
Merit goods and activities:
goods and activities that government believes are good for you even though you may or may not choose to engage in the activities or to consume the goods; often there are subsidies and tax benefits to encourage these
Government Failures:
situations in which the government intervenes and makes things worse (almost always)
Demand:
not want, willingness and ability to pay; refers to a schedule of quantities of a good that will be bought per unit of time at various prices, other things constant
