Economics Flashcards
Opportunity cost
Cost of the next best forgone opportunity
Mercantilism
16th-18th century More gold = better/stronger economy More exporting than importing Take all goods from colonies Colonies serve mother country
Capitalism
Means of production are privately owned and used to make a profit
Free individuals dictate the market
Individuals will make rational decisions to better their lives
Results in the betterment of everybody
Adam smith
Father of economics
Individuals seek their own interest = invisible hand leads them to benefit society
Against mercantilism
Invisible hand
Economy is led by individuals working towards their own self interest
Communism
Eliminates classes
Society owns everything equally
Eliminates needs for wages and private property
Karl Marx - communist manifesto
Russia revolution of 1917
Lenin placed communism in Russia
Stalin took over
Party in power oppresses poor and government officials use money to live luxurious lives while the populace remains poor
Socialism
Significant amount of common ownership of national resources where the government plans the allocation of resources to meet demands of society
Eliminate poverty and social class
High taxes, redistribution of wealth, complex tax systems with financial incentives
Government provides basic needs and heavy regulation on the economy
John Maynard Keynes
British economist of 1900
Government intervention = stable economy
Stimulate economy by reducing interest rates and investing in infrastructure
Borrow large sums and allocate resources to increase economy productivity
Perfect competition
Products are exactly the same
Infinite competitors
No profit made
Consumers go with the cheapest product
Monopolistic competition
Many firms present
Distinction of products = increased prices and innovation
Barriers to entry are few
Market advantages are short-lived
Oligopoly
Few sellers present
Compete with each other but each provider is aware of others actions
Monopoly
One firm controls the price, production, and supply of a good
Sets price and demand is inelastic
Inefficient = no need for innovation
Absolute advantage
Ability by an entity to produce more of a good or service than another entity using the same amount of resources
Comparative advantage
Ability of an entity to produce a good or service at a lower opportunity cost than another entity
World currency
Important in international trade
Change in value of the currency can significantly affect international trade
Free trade
Ability for one country to trade with another without the hindrance of regulation such as a tariff
Trade barrier
Obstacle in trade
Tariff, trade cap, subsidization
Tariffs
Tax on import or export
Retaliatory tariff
One country taxing a popular important from another country that placed a tariff on the first country
Done in order to get the first country to take off the original tariff
Lose-lose situation
Voluntary exchange
Voluntary exchange of one good or another
Promotes economic efficiency
Private property
One person owns and is responsible for the upkeep of land or capital
Encourages individuals to use their resources for the owners benefit
Competition
Firms will strive for a greater share of the market to sell or buy goods/services
Innovate and gain comparative advantage
Gives consumers the best product for a cheaper price
Barrier to entry
Entry to market is hindered by an obstacle
Ex: government regulation, higher start up cost
Reduce competition
Industrial revolution
Increase in economic productivity in the 1800s
Rise of standard of living
Rise of city populations
Increase in governmental activity in individual lives
Sherman antitrust act
Government to investigate, regulate, and control large companies for the purpose of preventing circumstances that restrict competition in the US
Smoot-Hawley tariff act
Largest tariff act in the US
20,000 tariffs placed on imports
Significant rise in unemployment and a depression of stock prices
Influential in Great Depression
WW1
Allowed US to maximize their economic capacity
Allowed America to lay and industrial foundation
Factories built to fulfill government contracts
Later used for civilian uses
Law of supply
As price increase, supply increases
As pride decreases, supply decreases
Law of demand
As price increases, demand decreases
As price decreases, demand increases
Scarcity
Humans do not have enough resources to meet every humans desires
Nothing is unlimited
