Economics Flashcards
Economics is what?
the study of how individuals and societies make choices under the condition of scarcity
Scarcity is what?
a condition that exists when there are not enough RESOURCES to satisfy all of the competing uses
what is allocation?
the action or process of distributing/issuing something.
What are the four types of economic systems
the TRADITIONAL economy,
the COMMAND economy,
the MARKET economy,
and the MIXED economy
what are incentive
an incentive is anything that motivates a person to do something. Specifically economics it is the financial motivations for people to take certain actions.
What is trade-off
when you give up something to gain something else.
what is opportunity cost?
It is the value of the next best alternative to the choice that was made aka what it costed you to make that decision aka what you had to give up
ITS THE WAY YOU GOT THAT LAST QUESTION RIGHT PURRRR SLAYYY💃🇯🇲🚫🎉
What is a economics the study
It is the study of how people choose to use their scarce and limited resources in an attempt to satisfy their unlimited wants
What are the three can make an item scarce
#1 Has to be limited in quantity #2 have to be desirable #3 has to have more than one valuable use
What is a Production Possibilities Curve
it shows the maximum amount of output that can be made using the current amount of resources (anything below the line is possible anything above the line is not possible)
Is money a resource?
NO!!
What is economic capital?
Any and all machinery and equipment
What/who is an entrepreneur
Some recognizes a profit opportunity, and is able to organize the resources, and it is willing to except risk (makes ideas and takes calculated risk)
what is Entrepreneurship?
The activity of coming up with the idea and starting a business, or taking on financial risks in the hope of profit
What is a marginal decision?
Decisions that involve doing a little more of something or doing a little less of something
What is marginal benefit?
the additional benefit resulting from an action/ marginal decision
What are four factors of production?
Land, labor, capital and entrepreneurship
what is marginal cost?
It is the additional cost that results from taking an action.
what is the PACED Decision Model?
P- define the Problem A- List the Alternative C- list the Criteria E- Evaluate D- make a Decision
what’s up common incentive for businesses?
Profit
What top three things influence purchasing decisions the most?
the value (quality) and price
what are Three Basic Economic Questions?
1 WHAT goods and services will be produced?
What is a traditional economy?
Basically the Amish
Describe free market economy
Those who are willing to pay will get the item
Describe a mixed economy
Government Controls things but not all things (America)
Describe a command economy
the government makes all or most of the economic decisions. (decides what, and how things will be can do produced and decide who gets what) (North Korea)
Market economy
consumers “voting” with their dollars where individuals and firms make decisions about what to produce, how much to produce, and who will produce and receive the goods and services
What is private enterprise?
Any business not owned by the government
Private enterprise is most likely associated with what?
Capitalism
Who was the father of modern economics
Adam Smith
what was Adam Smith’s philosophy on what drives free market economy?
he believed that markets work efficiently when individuals seek their own self-interests. By acting in their own self-interests, people will work hard enough to produce what consumers want.
What market force is the “regulator” of economic activity?
Competition
What is it called when workers focus on a specific task?
Specialization
What is consumer sovereignty
the desires of the consumers control the goods that will be produced (“dollar voting”)
what is marginal utility?
Marginal utility is the additional utility from consuming an additional unit of a good or service
( 1 cookie gives you 20 units of utility and 2 cookies give you 30 units of utility, the marginal utility from the second cookie is 10 because the second cookie added 10 units of utility)
what is a product market?
A market in which consumers purchase goods and services.
what is a factor market?
“Factor market” is a term economists use for all of the resources that businesses use to purchase, rent, or hire what they need in order to produce goods or services. Those needs are the factors of production, which include raw materials, land, labor, capital and entrepreneurship
What is Human capital?
It is a worker’s experience, knowledge and skills. (The more the better)
What is Total revenue?
Price of the product x the quantity sold
What is accounting profits
Total revenue – explicit costs
What is explicit costs?
Cost or payments that the firm paid for the resources to make a good or service
what are Implicit cost/indirect costs (same)
the opportunity costs of using resources owned by the firm in production.
economic profits are what?
the accounting profit minis the opportunity cost
what is a Sole Proprietorship?
It is a business owned by one person (the complete responsibility of the individual owner) (unlimited liability)
describe a Corporation
a corporation provides limited liability for its investors, (which means that none of the stockholders is obligated to cover the debts of the corporation beyond what he or she has invested in the company.) (limited liability)
describe a Franchise`
A recognizable trademark and brand, and a pre-existing infrastructure. For example, McDonald’s✨
describe a Cooperative
A legal form of business owned by the people who use its services or by the people who work there. Cooperatives are also multi-owner (limited liability firms)
what are the four basic market questions
- ) The number of consumers and producers in the market
- ) The type of good sold (identical or differentiated)
- ) The control a producer has over setting the price of the product
- ) How easy it is for producers enter and exit the market
what is a monopoly?
A market with only one seller
what is monopolistic competition
similar to a perfect market because it has a large amount of sellers but not a completely identical product
what makes a market competitive?
Having many buyers and sellers
what is a perfectly competitive market?
It is many consumers and producers, all selling a homogeneous (same/similar) product
what are same Benefits of Perfect Competition?
- production of a higher quantity
- a lower price for goods and services
- efficiency
what is a oligopoly market?
smaller amount of sellers (aka sellers have more control of price)
What is a factor market?
where the factors of production (land, labor, capital) are bought and sold.
What is a factor market?
where the factors of production (land, labor, capital) are bought and sold.
What is a factor market?
where the factors of production (land, labor, capital) are bought and sold.
What is a factor market?
where the factors of production (land, labor, capital) are bought and sold. (aka resource market)
what are the factors of production?
land, labor and capital
what is the product market
market that sells goods and services
what are some Injections into the circular flow
government spending
borrowing
value of exports
what are some Leakages from the circular flow
taxes
saving
value of imports
what are some “Determinants of Demand”?
TRIBE
1.) Tastes and preferences
- ) Related goods (the price of complements and substitutes)
- ) Income (affects goods differently, depending on type; normal good or inferior good)
- ) # of Buyers
- ) consumer Expectations
what makes a complementary good?
when a
when substitute or item that complements the good changes, it affects the demand for that good or service.
What is a “Normal good”?
Consumers buying more as their income increases and less as their income decreases
exp: fancy restaurant meal
what is “Inferior good”
Consumers buy LESS of it as their income INCREASES and more as their income decreases
exp: cheap ramen noodles
what are some Determinants of Supply?
TIN-P
1.) Technology
- ) Input costs (the cost of Resources; land, labor, capital)
- ) Number of Sellers
- ) Producer Expectations
What do sellers do during a surplus?
Lower the price
What do sellers do during a shortage
Raise the price
what is a price ceiling?
It is the maximum (legal) price a seller can raise a good/service to (established by the government, duh🙄)
what is a price floor?
It is the minimum (legal) price a seller can lower a good/service to (established by the government, duh🙄💅)
A price ceiling is a price _____ the equilibrium price and it creates a _____.
Below, shortage
A price floor is a price _____ the equilibrium price and it creates a _____
above, surplus
What difference between substitutes and complementary goods?
Substitute: when one price for one good up the demand for the other good goes down
Complement: and the demand for one good goes up the demand for the other good goes up as well
Price floors create _____, with _____ greater than the equilibirum quantity.
surpluses; quantity demanded
Price ceilings create _____, with _____ less than the equilibirum quantity.
shortages; quantity demanded
what happens to quantity demanded when price increases?
quantity demanded decreases (and vice versa when quantity demand is increased price decreases)
What is elasticity?
a good is can be elastic when there is a substitute or something that’s easily replaceable (when the price goes up)
EXP: if the price of a cheeseburger is too high you could just go to a different fast food restaurant to get a cheeseburger for cheaper
a good is inelastic if it is not easily replaceable i.e. life-saving leukemia medicine, no matter how expensive the medicine is you will continue to buy it because there’s no easy substitute SLAYYY💅🏾🎉✨
what are some Determinants of price elasticity of demand?
- ) Type of good (luxury or necessity)
- ) Availability of substitutes
- ) Time
- ) Share of budget
what are some Determinants of price elasticity of supply
- ) Number of producers
- ) Excess capacity
- ) Substitutability of inputs
- ) Time
what are the five type of market failures?
PUBLIC GOODS - goods are available to all and once they are provided can be obtained by others without payment.
EXTERNALITIES - when the costs or benefits of an action fall on others.
MARKET POWER - reduced competition (for example, a monopoly).
INEQUITY - income redistribution to address unfairness.
IMPERFECT INFORMATION - when buyers or sellers do not have the information required to accurately weigh the costs and benefits of a decision.
what are the three types of property?
- ) Real property—Real estate, houses, and land are considered real property. This type of property is fixed geographically in one place. It is not mobile.
- ) Personal property—Your clothes, school supplies, and cell phone are considered personal property. This type of property is mobile, so you can move personal property from one place to another.
- ) Intellectual property—The products of a person’s creative and intellectual thinking are considered intellectual property. This could include art, music, or writing a person has created.
exp: copyright or a movie or patent of an idea SLAYYY
what make a good rival and non-rival?
a rival good isa good that when one person’s use of it means that someone else can’t use for example a apple is a rival good
a non-rival good could be the radio, or fireworks because one persons use of it is not taking any thing away.
YASSS GIRL YOU BETTER💅🏾✨
what makes a private good?
goods that are excludable and rival
what makes a public good?
goods that are non-excludable and nonrival
what makes a common good?
a good that is non-excludable and rival
what makes a club good?
goods the are excludable but non-rival
QUEENNN PURRR
what is a subsidy?
the opposite of a tax
Explain the difference between private costs and external costs
Private costs are costs payed for by the consumer or producer
External costs are costs payed by an bystander, or someone other than the consumer or producer (any negative positive/neutral effect outside of what was intend is “payed”)
Describe a horizontal merger, a vertical merger, and a conglomerate merger
a horizontal merger- a merger between two companies that make the same product;
(for example, if two car companies or two grocery stores merge)
a vertical merger- is between companies involved at different stages of the supply chain producing a good or service;
(for example, a car manufacturer merging with a car parts company or a dairy farm merging with a cheese producer)
a conglomerate merger-a merger between unrelated businesses
(snack food producer and stuffed animal producer)
what is the NHTSA, FTC, CPSC, OSHA, EEOC and EPA
NHTSA-The National Highway Traffic Safety Administration
FTC-Federal Trade Commission(the nation’s most powerful consumer protection agency)
CPSC- Consumer Product Safety Commission ( protects consumers from unreasonable risks of injury or death associated with the use of many different types of consumer products.) (for consumers)
OSHA- Occupational Health and Safety Administration (monitors issues of workplace safety and health, including handling hazardous materials) (for workers)
EEOC- Equal Employment Opportunity Commission ( enforces laws involving job discrimination based on race, color, religion, sex, national origin, age, or disability etc.)
EPA- Environmental Protection Agency “protecting all Americans from significant risks to human health and the environment where they live, learn, and work” idk man💀😭
Name the three taxes
Progressive tax - Rich get taxed more poor get taxed less
flat tax- same percentage taxed for all
Regress tax- tax the rich and the poor more
Stuff of state and local federal revenue/spending (this is important )
State and local revenue- The majority of state tax revenues come from individual income taxes and sales taxes.
*Local government revenues tend to come from property taxes and transfers from state and federal government.
State and local spending- State and local governments spend on public welfare (especially healthcare), education, and transportation.
*Local governments focus much more on K-12 education.
Federal revenue- Individual income taxes make up almost half of federal tax revenues.
(The federal government can spend more than its tax revenues because it can borrow to pay the difference.)
federal spending- The federal government spends on healthcare, Social Security, and National Defense. (The largest category for spending is National Defense)
what are safety-net programs?
Safety-net programs help those vulnerable to economic hardships with necessities like food, housing, and medical care. (help to alleviate poverty)
when was Social Security was created?
by the Social Security Act of 1935 slay
what is GDP?
Gross Domestic Product(the market value of all final goods and services produced within the borders of a country during a specified time period, usually a year.)
(consumption, investment and government, consumption is the biggest net exports is the smallest)
what is export - import called?
net exports
What difference between GDP and GDI?
They’re the same but calculated in a different way
GDP=C+I+G+(X-M)
C= consumption expenditures I=investment expenditures G=Goverment spending (X-M) =Net export X=inport M=export
What are the three different types of unemployment frictional, structural, and cyclical✨
frictional unemployment- When people leave one job to search for another job they prefer, they are temporarily unemployed
structural unemployment- when people are looking for jobs and firms are looking for workers, but the people’s skills don’t match those the firms need ( job-seekers’ skills have become obsolete either in a given industry, geographic area, or both)
Cyclical unemployment- unemployment that results from the ups and downs in the economy (known as the business cycle). During a recession, fewer goods and services are demanded and workers may lose their jobs.
What is the velocity of money?
How many times the money gets passed around in a year
M x V = P x Y?
M = the supply of money in the economy
V = the velocity of money in an economy (the number of times a dollar is spent)
P = the price level of goods and services in an economy
Y = the final goods and services produced in the economy (GDP)
V and Y barely ever change
when M goes up, P goes up
what are the three types of inflation?
Demand-pull inflation- he result of an increase in the demand for goods and services: “too much money chasing too few goods.”
cost-push inflation-caused by an increase in the cost of inputs used by firms throughout the economy, like the cost of energy or workers.
(For example, if there was an increase in the price of oil, the cost of production will increase, causing the price of goods and services to rise.)
Long-run inflation- inflation that is often caused by increases in the economy’s money supply.
what is the money you borrowed from the bank called?
The amount you borrowed is called “the principal”
what make a recession?
It is an economic contraction that lasts for 6 consecutive months or more🫢
what are the three national economic goals?
Economic Growth- real GDP increases over time.
Full Employment- employment is high; unemployment rates are as low as possible.
Price Stability- inflation is low and stable.
Gross domestic product is a measure of a country’s what?
production of goods and services😩
What is fiscal policy
When Congress and the president use spending and taxing to affect the economy
What is Monetary policy
*altering the amount of money circulating in the economy
adjusting the Federal Funds Rate, a key interest rate that the Fed controls directly
- changing reserve requirements of commercial banks
- buying and selling securities on the open market
- lending money to banks and financial institutions
- paying interest on commercial bank reserves held at the Federal Reserve Banks
During a recession, the central bank will INCREASE the money supply so that the interest rate will DECREASE, causing borrowing to
INCREASE, which leads to an. INCREASE in spending and a
DECREASE in unemployment.
MEMORIZE THAT IS IMPORTANT!!! ITS MONETARY POLICY
According to economists, what drives long run inflation?
The supply of money
What are the different methods the government uses an expansionary fiscal policy and contractionary fiscal policy
Contractionary Fiscal Policy-
- decrease government spending
- increase personal income tax
- decrease transfer payments
Expansionary Fiscal Policy-
- increase government spending
- decreased personal income tax
- increase transfer payments
What is a country’s aggregate demand? (AD)
It is the demand for all goods and services (also known as gross domestic product).
The best case for effective fiscal policy is..?
recession during a demand shock
what are two automatic stabilizers in the U.S. economy
progressive income taxes and transfer payments💅
define, Observation lag, Wait and see lag, Legislative lag, Transmission lag and Effectiveness lag
Observation lag: The time it takes to identify there has been an economic downturn.
Wait and see lag: The time it takes for policymakers to determine if fiscal policy is necessary.
Legislative lag: The time it takes to determine and approve a policy proposal.
Transmission lag: The time it takes for the approved policy to be carried out.
Effectiveness lag: The time it takes for the policy to begin having an impact on real GDP and employment.
Define budget surplus and budget deficit
Budget deficit: When government government spending is more than government tax revenues
Budget surplus: When the government’s tax revenues are greater than government spending
What is Crowding out?
It is the decrease in private expenditure (spending by consumers and businesses) that occurs as a result of government spending or borrowing.
What is a Credit Union Institutions?
a non-profit financial cooperative whose members can deposit and borrow money
GIRL DONT GIVE UP HOPE!!, YOU. WILL. SLAY!
What is are savings and Loans Institutions?
accepts savings and makes loans, often for home mortgages
What are some functions of Banks and Other Financial Institutions?
Accept deposits: Financial institutions accept and pay interest on deposits. They provide safekeeping and offer a small return on depositor’s savings.
Make loans: Financial institutions pool deposits and use the funds to make loans, at a higher interest rate than paid for deposits
Process payments: Financial institutions perform additional agency functions for customers including processing checks, accepting direct deposits, and making payments and transfers.
What are four Government Regulation of Financial Markets?
The Federal Reserve: (is the central bank of the United States.) they the primary functions of the Federal Reserve is to supervise and regulate banks and to maintain the stability of financial markets.
The Federal Deposit Insurance Corporation (FDIC): is a federal agency that insures deposits in financial institutions in the event of bank failures. they also promote sound banking practices.
The Comptroller of the Currency: regulates and supervises financial institutions to ensure that that they operate in a safe and sound manner pur
The Securities and Exchange Commission (SEC): is a government agency responsible for protecting investors, maintaining functioning of securities markets, and facilitating capital formation.
define Federal Open Market, Federal Reserve System, Federal Reserve Bank, and the Board of Governors
Federal Open Market -The monetary policymaking body of the Federal Reserve System, composed of 12 voting members: the 7 members of the Board of Governors and 5 of the 12 Reserve Bank presidents
Federal Reserve System - The central bank of the United States, consisting of the Federal Reserve Board of Governors, 12 regional Federal Reserve Banks, and the Federal Open Market Committee
Federal Reserve Bank -The decentralized component of the Federal Reserve System. There are 12 in total, serving different regions of the United States.
Board of Governors - The independent government agency that provides general oversight of the Federal Reserve System
What are some traits of expansionary monetary policy?
Increase money supply, and lower federal funds rate, decrease the reserve requirement, buy government bonds and decrease discount rate
(opposite of everything for contractionary monetary policy) ILY! ILY ILY ILY
who is the Federal Reserve’s chief body for making monetary policy?
Federal Open Market Committee
What is the term that describes a form of money that has no intrinsic value and is money by government decree?
Flat money
What is the Federal Reserve System’s congressionally assigned dual mandate?
Price stability and maximum employment
Explain what absolute advantage and comparative advantage is?
Absolute advantage- when a country make it more than another country
Comparative advantage- who can make something with a lower relative cost (a lower opportunity cost)
What are some Factors That Affect Exports and Imports?
Natural resources, Location in the world, Labor force, Available Capital, The Cost of Production ect.
What is a Tariff? What is a quota? and What is a embargo?
A tariff- is a tax imposed by one country on the goods and services imported from another country
A quota- are limits on the quantity of goods that can be imported.
A embargo- is an outright ban on imports from and/or exports to a particular foreign nation, usually for political reasons.
Which of these is a financial institution owned by the account holders?
Commercial bank
This type of bankruptcy allows the debtor to keep his or her property and pay debts over a period of 3-5 years.
Chapter 13
