Econ, Org., Ops., IT Flashcards
Chapters 3, 7, 10, 14
Microeconomics
Studies human choices and resource allocation.
Demand
Demand refers to the willingness and ability of buyers to purchase goods and services at different prices. Demand is driven by a number of factors that influence how people decide to spend their money, including price and consumer preferences, and household income. It may also be driven by outside circumstances or larger economic events.
Supply
supply is the amount of goods and services for sale at different prices.
Demand Curve
demand curve is a graph of the amount of a product that buyers will purchase at different prices. Demand curves typically slope downward, meaning that buyers will purchase greater quantities of a good or service as its price falls.
Supply Curve
A supply curve shows the relationship between different prices and the quantities that sellers will supply or offer for sale, regardless of demand. As price increases, other things constant, a producer becomes more willing and able to supply the good. Movement along the supply curve is the opposite of movement along the demand curve.
Equilibrium price
The point where the two curves meet identifies the equilibrium price, the prevailing market price at which you can buy an item or the price toward which a good or service will trend. If the actual market price differs from the equilibrium price, buyers and sellers tend to make economic choices that restore the equilibrium level. Disequilibrium results in either a surplus or shortage.
Macroeconomics
Macroeconomics is the study of a country’s overall economic issues. Macroeconomic topics usually relate topics to be discussed—output, unemployment, and inflation. Macroeconomics refers to the performance, structure, behavior, and decision making of an economy as a whole. Each nation’s policies and choices help determine its economic system.
4 Types of Competition in Private Enterprise System
pure competition,
monopolistic competition,
oligopoly,
monopoly.
Pure competition
A market structure in which large numbers of buyers and sellers exchange homogeneous products and no single participant has a significant influence on price. Instead, prices are set by the market as the forces of supply and demand interact. Firms can easily enter or leave a purely competitive market because no single company dominates. Buyers see little difference between the goods and services offered by competitors.
Monopolistic competition
A market structure, like that for retailing, in which large numbers of buyers and sellers exchange differentiated (heterogeneous) products, so each participant has some control over price.
Oligopoly
A market structure in which relatively few sellers compete and high start-up costs form barriers to keep out new competitors. Competing products in an oligopoly usually sell for very similar prices because substantial price competition would reduce profits for all firms in the industry.
Monopoly
A single supplier in a market - occurs when a firm possesses unique characteristics so important to competition in its industry that they form barriers to prevent entry by would-be competitors.
Regulated monopolies
Local, state, or federal government grants exclusive rights in a certain market to a single firm. Pricing decisions—particularly rate-increase requests—are subject to control by regulatory authorities such as state public service commissions.
planned economy
government controls determine business ownership, profits, and resource allocation to accomplish government goals rather than those set by individual firms. Two forms of planned economies are communism and socialism.
Socialism
Characterized by government ownership and operation of major industries such as communications. Allows private ownership in industries considered less crucial to social welfare, such as retail shops, restaurants, and certain types of manufacturing facilities.
Communism
In which all property would be shared equally by the people of a community under the direction of a strong central government. Central government owns the means of production, and the people work for state-owned enterprises; determines what people can buy because it dictates what is produced in the nation’s factories and farms.
mixed market economies
economic systems that draw from both types of economies, to different degrees. The proportions of private and public enterprise can vary widely in mixed economies, and the mix frequently changes.
Privatization
Conversion of government-owned and operated companies into privately held businesses. Governments may privatize state-owned enterprises in an effort to raise funds and improve their economies. The objective is to cut costs and run the operation more efficiently.
Business Cycle Stages
prosperity, recession, depression, and recovery.
A business cycle is a cycle of fluctuation in the long-term natural growth rate of Gross Domestic Product (GDP).
Recession (Business Cycle)
a cyclical economic contraction that lasts for six months or longer—consumers frequently postpone major purchases and shift buying patterns toward basic, functional products carrying low prices. Businesses mirror these changes in the marketplace by slowing production, postponing expansion plans, reducing inventories, and often cutting the size of their workforce.
Recovery (Business Cycle)
In the recovery stage of the business cycle, the economy emerges from recession and consumer spending picks up steam. The economy experiences high levels of growth in gross domestic product, employment, output levels, and corporate profits.
Depression (Business Cycle)
If an economic slowdown continues in a downward spiral over an extended period of time, the economy falls into depression.
Prosperity (Business Cycle)
unemployment remains low, consumer confidence about the future leads to more purchases, and businesses expand—by hiring more employees, investing in new technology, and making similar purchases—to take advantage of new opportunities.
Productivity
the relationship between the goods and services produced in a nation each year and the inputs needed to produce them. In general, as productivity rises, so does an economy’s growth and the wealth of its citizens. In a recession, productivity stalls or even declines. Describes the relationship between the number of units produced and the number of human and other production inputs necessary to produce them.
Productivity (ratio)
Total productivity considers all inputs necessary to produce a specific amount of outputs. Stated in equation form, it can be written as follows:
Total Productivity = Output (goods or services produced) / Input (human/natural resources, capital)
Gross Domestic Product (GDP)
the sum of all goods and services produced within its boundaries. The GDP is based on the per-capita output of a country—in other words, total national output divided by the number of citizens.
Inflation
rising prices caused by a combination of excess consumer demand and increases in the costs of raw materials, component parts, human resources, and other factors of production. Excess consumer demand generates what is known as demand-pull inflation whereas increases in the costs of factors of production generate cost-push inflation. Devalues money as persistent price increases reduce the amount of goods and services people can purchase with a given amount of money.
Core Inflation
the inflation rate of an economy after energy and food prices are removed.
Deflation
occurs when prices continue to fall - when the inflation rate falls below 0%, also called a negative inflation rate.
Consumer Price Index (CPI)
measures the monthly average change in prices of goods and services.
Producer Price Index (PPI)
the average change over time of prices of goods and services received by domestic producers.
Unemployment Rate
Usually expressed as a percentage of the total workforce actively seeking work but currently unemployed. The total labor force includes all people who are willing and available to work at the going market wage, whether they currently have jobs or are seeking work.
Frictional unemployment
experienced by members of the workforce who are temporarily not working but are looking for jobs. (New graduates, those who left jobs and looking, former workers returning to labor force.)
Seasonal unemployment
joblessness of people in a seasonal industry. Construction workers, farm laborers, fishing boat operators, and landscape employees may contend with bouts of seasonal unemployment when conditions make work unavailable.
Cyclical unemployment
people who are out of work because of a cyclical contraction in the economy.
Structural unemployment
applies to people who remain unemployed for long periods of time, often with little hope of finding new jobs like their old ones. This situation may arise because these workers lack the necessary skills for available jobs or because the skills they have are no longer in demand.
Monetary Policy
government actions to increase or decrease the money supply and change banking requirements and interest rates to influence spending by altering bankers’ willingness to make loans.
Expansionary Monetary Policy
increases the money supply in an effort to cut the cost of borrowing, which encourages business decision makers to make new investments, in turn stimulating employment and economic growth.
Restrictive (Contractionary) Monetary Policy
reduces the money supply to curb rising prices, over expansion, and concerns about overly rapid economic growth. This is accomplished by increasing interest rates.
Fiscal Policy
government spending and taxation decisions designed to control inflation, reduce unemployment, improve the general welfare of citizens, and encourage economic growth.
Budget Deficit
When the government spends more than the amount of money it raises through taxes. To cover the deficit, the U.S. government borrows money by selling Treasury bills, Treasury notes, and Treasury bonds to investors. All of this borrowing makes up the national debt.
Budget Surplus
excess funding that occurs when government spends less than the amount of funds raised through taxes and fees.
Global Economic Challenges
(1) asset bubbles in a major economy, (2) deflation in a major economy, (3) failure of a major financial mechanism or institution, (4) failure/shortfall of critical infrastructure, (5) fiscal crises in key economies, (6) high structural unemployment or underemployment, (7) Illicit trade, (8) Trade tensions, (9) Energy price shock, (10) Unmanageable Inflation.
Management
the process of achieving organizational objectives through people and other resources. The manager’s job is to combine human and technical resources in the best way possible to achieve the company’s goals.
