final Flashcards
3 key questions
What to produce?
How to produce?
Who consumes?
Scarcity
unlimited wants exceed limited productive resources
Shortage(temporary) and the 3 causes
The demand for a product is greater than the supply of that product
Three causes- too much demand, not enough supply, gov. regulation
Goods v. Services
Goods are tangible items you buy, service is an act done for another
Four types of economies
Free market is run by the people
Mixed market is run by the people and government
Command is run by the government
Traditional is based on religion, culture, heritage
Why do markets exist?
b/c we cannot produce everything we need or want
Factors of production
Land is ingredients or parts of product
Labor is who does the work
Capital is any human made resources used to make a product
Capital
Human is knowledge or skill
Physical is tools
Financial is money
Social is connections
Opportunity cost
The option given up when you make a decision
Factor Markets is…
Where we trade our labor for pay
Product Market
Where we trade our money for product
Law of demand
When prices go up, quantity demanded goes down. Prices go down, and quantity demanded goes up.
Substitution effect
When you cannot get what you want so you have to settle for something else
Compliments
When you typically buy two things together
The law of supply
works the way it does because businesses want profit.
Equilibrium
The price of a product
Price floor
When the price cannot go any lower, like minimum wage
Price ceiling
When the price cannot go any higher, like rent control
Who sets it
The government sets both
Measurements used for steady economic growth, stable prices, and full employment
GDP, inflation (CPI), and employment rate
GDP
The dollar value of everything produced in a country in a year
Four categories of spending
Government spending, consumer spending, net exports, investments
Inflation
The general increase in prices and lowering the value of the dollar. Purchasing power is how far your money would go
Recession and Depression
3-6 months and 6+ months of economic downturn
3 roles of $
Medium of exchange, store of value, standard value
Monetary policy
Amount of money in the economy
Fiscal policy
Government taxes and spending
Deficit
Not enough money to pay what is owed
Debt
The overall amount owed
Specialization
Focusing on one or a few skills/products at a time
Absolute advantage
The best overall based on the metric
Comparative advantage
Who has the lowest opportunity cost
Different opportunity costs > > > Higher standard of living
Creates comparative advantage > Allows specialization > Efficiency allows gains from trade
Tariffs
a tax placed on goods imported into a country
Quotas
Limits on the quantity of goods that can be imported into a country
Embargoes
A complete ban on trade with a country (usually due to political disputes)
Standards
Requirements a good must meet before it can be imported
Subsides
Government payments to domestic producers that help the domestic companies compete with producers in other nations
Circular flow
google it fades out of existence
Price floor and price ceiling
google sigh
Business cycle
google jumps of brides
