Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

CPA BEC > Economic Concepts > Flashcards

Economic Concepts Flashcards

1
Q

Economics

A

The study of how scarce resources are allocated to satisfy unlimited wants.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Microeconomics

A

The study of decisions related to the allocation of scarce resources by small, individual economic agents, such as households or firms. Buyers in the economy provide the demand for products/services and sellers provide the supply of products/services

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Demand/Demand Curve

A

The amount (quantity) of a product or services that a market will absorb (demand) at a given price, assuming all other factors remain constant. The demand curve is a graph showing the inverse relationship between price and quantity demanded.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Supply/Supply Curve

A

A graph showing the amount (quantity) of a product or service that will be provided (supplied) at any price, assuming all other factors remain constant. The supply curve is a graph showing the direct relationship between the price and quantity supplied (offered).

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Demand Curve Shift/ Reasons

A

Changes in the quantity demanded of a product/service for reasons other than a change in price. Reasons for an upward (positive) demand curve shift includes:

  • The price of substitute goods increases
  • expected future price increases
  • Income increases so demand for normal goods increases
  • The market size increases
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Elasticity

A

A measure of the sensitivity of supply or demand to a change in determinant, such as price, which normally has a direct relationship withe supply and an inverse relationship with demand; or consumer income, which normally has a direct relationship with demand, driving up price and stimulating supply.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Price Elasticity of Demand (Ed)

A

The ratio of the change in demand compared to a change in the price measured as the change in demand, stated as a percentage, divided by the change in price, also stated as a percentage
(Change in qty demanded/avg qty demanded)/(Change in price/Avg price)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Elastic

A

When the absolute value of ED is greater then 1, ignoring the fact that is is generally a negative number , indicating an increase in price will result in a decrease in demand that is proportionately higher than the increase in price causing total revenue to decrease. If, for example, a 5% increase in price causes a 10% decrease in demand, total revenues decline.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Inelastic

A

When the absolute value of ED is less than 1, ignoring the fact that it is generally a negative number, indicating that an increase in price will result in a decrease in demand that is proportionately lower than the increase in price causing total revenue to increase. If, for example, a 10% increase in price causes a 5% decrease in demand, total revenues increase.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Unitary Elasticity

A

When the absolute value of ED is equal to 1, ignoring the fact that it is generally a negative number, indicating that an increase in price will result in a proportionate decrease in demand causing total revenue to remain unchanged.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Income Elasticity of Demand (EI)

A

The ratio of the change in demand compared to a change in income measured as the change in demand, stated as a percentage, divided by the change in income, also stated as a percentage
(Change in qty demanded/avg qty demanded)/(Change in income/ avg Income)
EI>0 normal good
EI<0 inferior good

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Cross Elasticity of Demand (EXY)

A

A measurement comparing the change in qty demanded for one product (X) to the change in price of another (Y) to determine if the products are substitutes, indicated by a positive number, or compliments, indicated by a negative number.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Price Elasticity of Supply (ES)

A

The ratio of the change in supply compared to a change in price measured as the change in supply, stated as a percentage, divided by the change in price, also stated as a percentage
(Change in qty supplied/avg qty supplied)/(Change in price/avg price)
Tells how a change in price will affect the qty supplied.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Opportunity Cost

A

The value of the best alternative that is not selected when resources can be applied to more than one purpose, such as a job offer that was rejected in order to accept a more desirable alternative.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Equilibrium Price

A

The point where qty demanded meets qty supplied, meaning everything supplied (offered for sale) is sold (demanded).

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Marginal Propensity to Save (MPS)

A

The portion of the next dollar of available disposable income a consumer will save measured as the Change in Savings/Change in disposable income.
1-MPS=MPC (Marginal propensity to consume/spend).

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Price ceiling

A

a maximum legal price at which a product or service may be sold, usually imposed by governments, and generally results in a shortage (When qty demanded exceeds qty supplied)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Price Floor

A

a minimum legal price at which a product or service may be sold, usually imposed by governments and generally results in surplus (When qty supplied exceeds qty demanded).

19
Q

Law of Diminishing Marginal Utility

A

The theory that the more of a resource consumed, the lower the marginal utility (satisfaction) will be for the next unit such that the marginal utility of a second cookie, for example, is greater than the marginal utility of a third cookie.

20
Q

Indifference Curve

A

A graphic representation of the various combinations of two resources that will provide equal value such that a consumer will be indifferent as to which combination af resources was to be acquired.

21
Q

Returns to Scale

A 
The increase in units produced (Output)resulting from an increase in production costs incurred, input is measured by the ratio: percentage increase in Output/Percentage increase in Input.
If > 1 = Economies of scale
so outputs > inputs
If < 1 = Dis-economies of scale,
so outputs < inputs
22
Q

Pure (Perfect) Competition

A

An environment that includes a large enough number of suppliers of a product or service, with ease of entering or exiting the market, such that no individual market participant has the ability to influence the market or set prices. Perfectly elastic demand curve.

23
Q

Pure Monopoly

A

A situation where there is only one supplier for a particular product or service and for which there are no close substitutes. The demand curve is downward sloping, almost vertical.

24
Q

Monopolistic Competition

A

A situation where multiple suppliers with the ability to easily enter or exit the market, compete on the basis of factors other then price by differentiating their products such that they are not perceived as substitutes for one another. Demand curve is slightly downward sloping.

25
Q

Oligopoly

A

A situation with barriers to entry into the market, which limit the number of suppliers to a few who are producing heterogeneous or homogeneous products, providing those providers limited ability to control prices. The demand curve is kinked.

26
Q

SWOT analysis

A

Formal definition and analysis of an organizations (SWOT) Strengths, Weaknesses, Opportunities, Threats. This is part of strategic planning, in which the organization attempts to identify its long-term goals and determine how to best reach those goals.

27
Q

Mission Statement

A

A statement outlining the long-term purpose of an organization, the reason for its existence. This is the first step in strategic planning.

28
Q

Macroeconomics

A

The study of the economy as a whole, which includes unemployment, inflation and long - term economic growth.

29
Q

Gross Domestic Product (National Gross Domestic Product or GDP)

A

The final market value of all goods and services produced by domestic residents of a country in one year, calculated using the production or output approach, the income approach, or the expenditure approach.

30
Q

Demand - Pull inflation

A

An increase in prices caused by an increase in aggregate demand at a faster pace than the increase in aggregate supply, shifting the demand curve to the right

31
Q

Cost-Push Inflation

A

An increase in prices caused by an increase in the cost of goods and services for which no suitable substitutes are available, such as a rise in the price of oil, shifting the supply curve to the left.

32
Q

Multiplier Effect

A

The disproportionate increase in economic activity in response to an initial change in activity, such as a government purchase causing suppliers to increase production to fulfill the order as well as an anticipated increase in demand based on the increase in spending measured with the formula:
(Change in spending/Marginal propensity to Save)

33
Q

Business Cycle

A

A fluctuation in aggregate economic output that may last from a few months to several years, beginning when the economy is at the peak of a period of expansion and ending when it is at the lowest point in a period of contraction (recession), of vice versa.

34
Q

Expansion

A

A period which production and GDP increase on an uninterrupted basis, beginning when the economy is at the lowest point of a period of contraction and ending when it reaches its highest point before declining again.

35
Q

Contraction (Recession)

A

A period during which production and GDP decrease on an uninterrupted basis, beginning when the economy is at the highest point of a period of expansion and ending when it reaches the lowest point before increasing again

36
Q

Economic Indicators

A

Economic factors used to gauge, evaluate and predict current and future economic conditions. Tells us which part of the business cycle the economy is in. Includes Leading indicators (predicts the duration of a period of expansion or contraction), Coincident indicators (factors that move simultaneously with, and in the same direction as , the overall economy), Lagging indicators (factors that begin to move after the beginning of a period of expansion or contraction)

37
Q

Frictional Unemployment

A

(Normal Unemployment) results from people changing jobs or newly entering the workforce

38
Q

Structural Unemployment

A

is a circumstance where supply of labor exceeds the demand while the work force may not be suitable to meet the demand either due to differences between skills needed and those held by workers or the geographical location of laborers.

39
Q

Cyclical Unemployment

A

Caused by variations in business cycles

40
Q

Institutional Unemployment

A

Caused by restrictions on the workplace resulting from government regulation, such as minimum wage

41
Q

Full Employment Unemployment Rate

A

Calculated as Frictional unemployment+Structural Unemployment

42
Q

Economic Policies

A

Fiscal policies consists of actions by the government related to revenues and spending that impact the economy (taxes, subsidies, government spending).
Monetary policy consists of actions by the federal reserve that impact the economy (reserve ratio, discount rate, open market operations), which may be expansionary by increasing money supply, or may be designed to contract the economy by decreasing the supply of money.

43
Q

Economic Theories

A

Schools of thought to explain recurring business cycles and how governments contribute to their changes.
Classical Economic Theory - No government intervention
Keynesian Theory- Government taxation or spending
Monetarist Theory - Use of monetary policy
Supply-Side Theory - Reduction of Taxes
New-Keynesian Theory - Combination of the Keynesian and monetarist theory
Austrian Theory - Low interest rates cause excessive borrowing, which results in volatile and unstable economy

CPA BEC (3 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions