Economics Flashcards
1
Q
the study of how people use limited resources to meet unlimited wants
A
Economics
2
Q
limited quantities of resources to meet unlimited wants
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Scarcity
3
Q
Factors of production
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land, labor, and capital; the three groups of resources that are used to make all goods and services
4
Q
all human-made goods that are used to produce other goods and services, tools, and buildings
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Physical capital
5
Q
the skills and knowledge gained by a worker through education and experience
A
Human capital
6
Q
the most desirable alternative given up as the result of a decision
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Opportunity cost
7
Q
an alternative that we sacrifice when we make a decision
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Trade-offs
8
Q
deciding whether to do or use one additional unit of some resource
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Thinking at the margin
9
Q
a line connecting data points on a graph that shows the combinations of the production of products
A
Production possibilities frontier
10
Q
using resources in such a way as to maximize the production of goods and services
A
Efficiency
11
Q
a phrase that refers to the trade-offs that nations face when choosing whether to produce more or less military or consumer goods
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Guns or butter
12
Q
the method used by a society to produce and distribute goods and services
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Economic system
13
Q
the income people receive for supplying factors of production, such as land, labor, or capital
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Factor payments
14
Q
Economic goals
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economic efficiency, growth, freedom, security, and equity
15
Q
government programs that protect people experiencing unfavorable economic conditions
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Safety net
16
Q
economic system that relies on habit, custom, or ritual to decide questions of production and consumption of goods and services
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Traditional economy
17
Q
economic system in which decisions on production and consumption of goods and services are based on voluntary exchange in markets
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Market economy
18
Q
economic system in which the central government makes all decisions on the production and consumption of goods and services
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Centrally planned economy
19
Q
market-based economic system with limited government involvement
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Mixed economy
20
Q
the concentration of the productive efforts of individuals and firms on a limited number of activities
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Specialization
21
Q
shows interactions of households and firms in the free market
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Circular flow of market economy
22
Q
self interest and competition work together to create a self-regulating market
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Self-regulation of market economy
23
Q
term economists use to describe the self-regulating nature of the marketplace
A
Invisible hand
24
Q
a political system characterized by a centrally planned economy with all economic and political power resting in the hands of the central government
A
Communism
25
an economic system characterized by private or corporate ownership of capital goods; investments that are determined by private decision rather than by state control; and determined in a free market
Free enterprise
26
the concerns of the public as a whole
Public interest
27
protects private ownership and encourages entrepreneurship to stimulate efficiency
Purpose of free enterprise
28
laws requiring companies to provide full information about their products
Public disclosure laws
29
enforced laws by the federal trade commission
Consumer protection laws
30
an income level below that which is needed to support families or households
Poverty threshold
31
government aid to the poor
Welfare
32
provides direct cash transfers of retirement income to the nation’s elderly
Social security
33
provides money to eligible workers who have lost their jobs
Unemployment insurance
34
form of insurance providing wage replacement for workers injured on the job
Workers compensation
35
a shared good or service for which it would be impractical to make consumers pay individually and to exclude nonpayers
Public good
36
someone who would not choose to pay for a certain good or service, but who would get the benefits of it anyway if it were provided as a public good
Free rider
37
paid work, trade or profession
Employment
38
increasing in size
Growth
39
the state of being stable
Stabilility
40
consumers buy more of a good when its price decreases and less when its price increases
Law of demand
41
when consumers react to an increase in a good’s price by consuming less of that good and more of other goods
Substitution effect
42
the change in consumption resulting from a change in real income
Income effect
43
a graphic representation of a demand schedule
Demand curve
44
a Latin phrase that means “all other things held constant”
Ceteris paribus
45
a good that consumers demand more of when their income increases
Normal good
46
a good that consumers demand less of when their incomes increase
Inferior good
47
Factors that shift demand
income, related goods price, expectations of future prices, number of buyers, tastes
48
two goods that are bought together
Complements
49
foods used in place of one another
Substitutes
50
a measure of how consumers react to a change in price
Elasticity of demand
51
Elasticity of demand calculation
the percentage change in demand of a good divided by the percentage change in the price of the good
52
Determinants of elasticity
availability of substitutes, importance, need vs. want
53
tendency of suppliers to offer more of a good at a higher price
Law of supply
54
a measure of the way quantity supplied reacts to a change in price
Elasticity of supply
55
a graph of the quantity supplied of a good at different prices
Supply curve
56
describes when suppliers have altered production output
Shifts in supply
57
Factors that shift supply
technology, taxes, subsidies, regulations
58
a cost that does not change, no matter how much of a good is produced
Fixed costs
59
a cost that rises or falls depending on how much is produced
Variable costs
60
the cost of producing one more unit of a good
Marginal costs
61
Governments influence on supply
the government can place taxes, subsidies, and regulations
62
a government payment that supports a business or market
Subsidies
63
a required payment to a local state, or national government
Taxes
64
government intervention in a market that affects the production of a good
Regulations
65
a tax on the production or sale of a good
Excise taxes
66
the additional income from selling one more unit of a good; sometimes equal to price
Marginal revenue
67
the point at which quantity demanded and quantity supplied are equal
Equilibrium
68
describes any price or quantity not at equilibrium; when quantity supplied is not equal to quantity demanded in a market
Disequilibrium
69
when quantity demanded is more than the required amounts
Excess demand
70
when quantity supplied is more than quantity demanded
Excess supply
71
a maximum price that can be legally charged for a good or service
Price ceiling
72
a price ceiling placed on rent
Rent control
73
a minimum price that can be legally charged for a good or service
Price floor
74
a minimum price that an employer can pay a worker for an hour of labor
Minimum wage
75
Problems with ceilings
ceilings cause shortages
76
Problems with floors
floors cause surpluses
77
increase in supply and constant demand will result in decreased equilibrium quantity
Shifts in supply, demand, equilibrium
78
a situation in which a good or service is unavailable, or a situation in which the quantity demanded is greater than the quantity supplied, also known as excess demand
Shortage
79
the financial and opportunity costs consumers pay when searching for a good or service
Search costs
80
the market gives producers an incentive to produce goods that consumers want
Advantages of prices
81
an expectation that encourages people to behave in a certain way
Incentives
82
costs of production that affect people who have no control over how much of a good is produced
Spillover costs
83
constantly subjected to both factors resulting in supply shifts and factors resulting in demand shifts
Shifts in equilibrium
84
the market in which households purchase the goods and services that firms produce
Product markets
85
a market that has a broad range of competitors who are selling the same product
Pure competition
86
a market structure in which many companies sell products that are similar but not identical
Monopolistic competition
87
a market structure in which a few large firms dominate a market
Oligopoly
88
a market dominated by a single seller
Monopoly
89
the governments regulate markets to protect the interests of consumers
Monopoly regulation
90
in theories, these are barriers that make it hard to enter a certain market
Barriers to entry
91
a market that runs most efficiently when one large firm supplies all of the output
Natural monopolies
92
the cost advantages that enterprises obtain due to size, output, or scale of operation with cost per unit of output generally decreasing with increasing scales as fixed costs are spread out over more units of output
Economies of scale
93
the process of distinguishing a product or service from others, to make it more attractive to a particular target market. This involves differentiating it from competitors' products as well as a firm's own products
Product differentiation
94
the act of redirecting resources from being consumed today so that they may create benefits in the future; the use of assets to earn income or profit
Investment
95
the system that allows the transfer of money between savers and borrowers
Financial system
96
claim on the property or income of a borrower
Financial assets
97
a person who acts as a link between people in order to try to bring an agreement
Intermediaries
98
fund that pools the savings of many individuals and invests this money in a variety of stocks, bonds, and other financial assets
Mutual funds
99
spreading out investments to reduce risk
Diversification
100
a collection of financial assets
Portfolio
101
a formal contract to repay borrowed money with interest at fixed intervals
Bonds
102
the interest rate that a bond issuer will pay to a bondholder
Coupon rate
103
the amount that an investor pays to purchase a bond that will be repaid to investor at maturity
Par value
104
the annual rate of return on a bond if the bond were held to maturity
Yield
105
are expressed as letters ranging from 'AAA', which is the highest grade, to 'C'
Bond ratings
106
Types of bonds
corporate, treasury, municipal, mortgage, investment, junk
107
a certificate of ownership in a corporation
Stocks
108
the portion of corporate profits paid out to stockholders
Dividend
109
getting more back than what you paid for it
Capital gain
110
getting back less than what you paid for
Capital loss
111
index that shows how stocks of 30 companies in various industries have changed in value
Dow Jones Industrial Average
112
a steady rise in the stock market over a period of time
Bull market
113
a steady drop in the stock market over a period of time
Bear market
114
Crash of 1929 (causes)
- borrowing money (credit)
- over-speculation (high-risk investments with borrowed money in hoped of getting a big return)
- lack of regulation
115
an individual retirement account allowing a person to set aside after-tax income up to a specified amount each year. Both earnings on the account and withdrawals after age 59½ are tax-free
Roth IRA
116
real GDP divided by the total population
GDP per capita
117
calculates GDP by adding up all the incomes in the economy
Income approach
118
totals annual expenditures on four categories of final goods and services (consumer, business or investment, government, net exports or imports)
Expenditure approach
119
a period of macroeconomic expansion followed by a period of contraction
Business cycle
120
Business cycle phases
- Expansion (a period of economic growth as measured by a rise in real GDP)
- Peak (the height of an economic expansion, when real GDP stops rising)
- Contraction (a period of economic decline marked by falling real GDP)
- Trough (the lowest point in an economic contraction, when real GDP stops falling)
121
the proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan outstanding
Interest rates
122
a tax in which the percentage of income paid in taxes increases as income increases
Progressive tax
123
a tax for which the percentage of income paid in taxes remains the same for all income levels
Proportional tax
124
a tax for which the percentage of income paid in taxes decreases as income increases
Regressive tax
125
Federal expenditures (Top 3)
1. mandatory spending
2. interest on federal debt
3. discretionary spending
126
taxes that fund Social Security and Medicare
FICA
127
the analysis of the effect of a particular tax on the distribution of economic welfare
Tax incidence
128
any commodity which is produced and subsequently consumed by the consumer, to satisfy its current wants or needs
Final goods
129
goods used in the production on final goods
Intermediate goods
130
GDP expressed in constant, or unchanging, prices
Real GDP
131
GDP measured in current prices
Nominal GDP
