Economics Flashcards
When the prices of an item increases supply increases- because more sellers are willing to sell.
Economics
When supply changes due to something other than price.
Economics
Supply increases at each price point
Higher Equilibrium GDP
Number of sellers increases - market can get flooded
Examples: Government subsidies or technology improvements that decrease costs for suppliers
Economics
Supply decreases at each price point
Lower Equilibrium GDP
Cost of producing item increases
Examples: Shortage of gold- so less gold watches are made; wars or crises in rice-producing countries means there is less rice on the market
Economics
When the prices of an item increases- demand for it decreases.
Economics
When demand changes due to something other than price.
Economics
When demand increases at each price point
Price of substitutes go up - price of beef rises- so people buy more chicken
Future price increase is expected - War in Middle East- people go out and buy gas
Market expands - i.e. people get new free health care plan- demand at clinic rises
Expansion - more spending increases equilibrium GDP
Economics
Demand decreases at each price point.
Price of complement goes up - price of beef goes up- less demand for ketchup
Boycott - Company commits social blunder- consumers boycott
Consumer income rises - Demand for inferior goods drops as people have more money to spend
Consumer tastes change
Contraction - less spending decreases equilibrium GDP
Economics
How much you spend when your income increases
Calculate: Change in Spending / Change in Income
Economics
How much you save when income increases
Calculate: Change in Savings / Change in Income
Also equals 1 - Marginal Propensity to Consume
Economics
(1 / 1-MPC) x Change in Spending
Economics
As spending by consumers or the government increases- the demand curve increases (shifts right).
Economics
The increase in demand ends up being larger than the amount of additional income spent in the economy due to the multiplier effect.
One consumer spends money- which:
*Increases the income of a business
*Increases the income of a vendor
*Increases income of employees
*Increases tax revenue
Economics
% Change in Quantity Demand / % Change in Price
Economics
Price increases- Revenue decreases
Price decreases- Revenue increases
Economics
Many substitutes (luxury items)
Considered elastic if elasticity is greater than 1
10% drop in demand / 8% increase in price : 1.25 (Elastic)
Price increases- Revenue decreases
Price decreases- Revenue increases
Economics
Price increases- Revenue increases
Price decreases- Revenue decreases
Economics
Few substitutes (groceries- gasoline)
Considered inelastic if coefficient of elasticity is less than 1
5% drop in demand / 10% increase in price : .5 (inelastic)
Price increases- Revenue increases
Price decreases- Revenue decreases
Economics
Total revenue will remain the same if price is increased
Considered unitary if coefficient of elasticity : 1
Economics
% Change Quantity Demanded / % Change in Income
Normal goods greater than 1 (demand increases more than income)
Inferior goods less than 1 (demand increases less than income)
Economics
Interest rates increase
Reduced demand for loans
Reduced demand for houses- autos- etc.
Value of bonds and fixed income securities decrease
Inferior good demand to increase
Foreign goods more affordable than domestic
Demand for domestic goods decrease
Economics
Overall spending increases
Demand increases (shifts right)
Market equilibrium price increases
Economics
Overall production costs increase
Supply decreases (shifts left)
Market equilibrium price increases
Note: Demand-Pull and Cost-Push Inflation BOTH result in market equilibrium price to increase
Economics
The price where Quantity Supplied : Quantity Demanded
Economics
When Marginal Revenue : Marginal Cost
Economics
Causes a surplus if above equilibrium price.
Economics
The annual value of all goods and services produced domestically at current prices by consumers- businesses- the government- and foreign companies with domestic interests
Included: Foreign company has US Factory
Not included: US company has foreign factory
Economics
Sole Proprietor and Corp Income
Passive Income
Taxes
Employee Salaries
Foreign Income Adjustments
Depreciation
Economics
Individual Consumption
Private Investment
Government Purchases
Net Exports
Economics
Measures goods/services in current prices.
Economics
Used to convert GDP to Real GDP
Economics
Nominal GDP / GDP Deflator x 100
Economics
Like GDP; Swaps foreign production. US Firms overseas are included- Foreign firms domestically are not included
Economics
Price of goods relative to an earlier period of time- which is the benchmark. Year 1 : 1.0
((CPI Current - CPI Last) / CPI Last) * 100
Economics
Personal Income - Personal Taxes
Economics
% Increase in output / % Increase in input
Greater than 1 : Increasing returns to scale
Less than 1 : Decreasing returns to scale
Economics
When GDP growth is negative for two consecutive quarters.
Economics
A prolonged- severe recession with high unemployment rates
No requisite period of time for the economy to officially be in a depression
Economics
Peak (highest)
Recession (decreasing)
Trough (lowest)
Recover (increasing)
Expansion (higher again)
Economics
Conditions that occur before a recession or before a recovery
Example: Stock Market or New Housing Starts
Economics
Conditions that occur after a recession or after a recovery
Examples: Prime Interest Rates- Unemployment
Economics
Conditions that occur during a recession or during a recovery
Example: Manufacturing output
Economics
Only people looking for jobs
Economics
GDP doesn’t grow fast enough to employ all people who are looking for work
Example: People are unemployed in 2010 because there aren’t enough jobs available due to the economy
Economics
People are changing jobs or entering the work force. This is a normal aspect of full employment.
Example: A recent college graduate is looking for a job
Economics
A worker’s job skills do not match those necessary to get a job so they need education or training
Example: A construction worker wants to work in an office- so they quit their job and get computer training
Economics
High Unemployment : Low Inflation (Vice Versa)
Economics
The rate a bank pays to borrow from the Fed.
Economics
The rate a bank charges their best customers on short-term borrowings.
Economics
Inflation-adjusted interest rate
Economics
Rate that uses current prices
Economics
Rate for a loan with 100% certainty of payback.
Usually results in a lower rate.
US Treasuries are an example.
Economics
Currency- Coins- and Deposits
Economics
Highly liquid assets other than currency- coins or deposits
Economics
Increased spending levels without increased tax revenue.
Lower taxes without decrease in spending
Gamble that the multiplier effect will take over and boost economy
Economics
By buying and selling the government’s securities.
Economics
By adjusting the discount rate charged to banks
Economics
A tax on imported goods
Economics
A limit on the number of goods that can be imported
Economics
They are good for domestic producers.
Demand curve shifts right
Fewer substitutes
They can charge higher prices
Economics
They are bad for foreign producers
Demand curve shifts left
Fewer buyers
They must charge lower prices
Economics
They are good for foreign consumers
Supply curve shifts right
Goods purchased at lower prices in the foreign markets
Economics
They are bad for domestic consumers
Supply curve shifts left
Fewer goods bought due to higher prices
Economics
Explicit (Actual) cost of operating a business
Implicit costs are opportunity costs
Economics
Revenue - Accounting Cost
Economics
Explicit + Implicit Cost
Economics
Revenue - Economic Cost
Economics
