Key Terms Of Economics Flashcards
Explain “supply” in the law of supply and demand
- How much of something is available
1. If supply goes down
2. and demand remains constant
3. $ price goes up
What is the most fundamental concept of economics?
The law of supply and demand
What is an example of supply going down, demand staying the same, and price going up?
Fruit in season is cheaper because is grown easier and there is higher supply
- if you want fruit out of season it is more expensive b.c. It must be flown in and there is a lower supply around (scarce)
The degree to which scarcity affects the price depends on ?
How necessary the item is to consumers and the availability of suitable substitutes
** sometimes ppl say a fruit is too much so they will just buy another fruit instead
Sometimes there are no substitutes for certain products. Explain how scarcity can affect prices in those products
If a medication for a serious illness becomes scarce (less of it)
The price can go way up
- No other choice also
What does scarcity mean?
Low supply
What is demand?
How much of something people want
- How many ppl want a thing
- How much do they want that thing
If demand goes down and supply stays constant, what happens?
Price goes down
- Computer is out
- Newer one hits the market
- No1 wants old
- Price for old goes down
• try to still sell old a lower price
Money is a?
Money is a circulating medium of exchange
** people use it
Many original forms of money is ?
Commodity money
** gold pieces have inherent value
Most modern forms of money have very little what?
Very little intrinsic value
How much is the 20-dollar bill worth?
Few cents
** government says it is worth 20 dollars - everyone accepts
Commodity money actually has?
Intrinsic Value - roughly equal to the value it represents
What can be exchanged through a barter system?
Goods and Services
- Someone who needs a cow and has a pig can trade with someone who has a pig and needs a cow
* common in the old days
** occurs occasionally today
Bartering services could be considered?
Clean my house
Ill clean your car
WhAt is one of the values money has over a barter system?
Instead of needing to find a certain person that needs a good or service in exchange for your good or service you can just give them money that represents the value of something they want
What does a nation’s supply of money consist of?
Currency
Bank Deposits
** a nation may also print more money
What is currency?
Bills and coins in circulation
What are bank deposits?
Value is held in computer system
Currency does not have to be in the bank itself
- can be re-released
WhAt can printing too much money cause?
Lead to excess inflation
- can be damaging to consumers and business
Because the government produces more money how does inflation occur and what is it?
The value of each unit of currency is less because there are more bills floating around/created than represented currency
Can you buy more or less with excess inflation occurring?
Each unit of currency does not have as much value, therefore you can not buy as much
What can happen with excess inflation to individuals and businesses ?
Devaluation of assets for individuals and businesses
What does stock represent?
Stock represents
- an investment made in a company by individuals or groups, and typically represents ownership shares in that company
Mutual funds
group investing in a particular investment or a variety of investments
When you own a stock you have a?
- Share
- Part ownership in the company
What are dividends paid by companies?
If you have a stock based on your share on ownership - you will get paid on that percentage
What if stocks are not paid dividends?
All of the value is in the stock
- if you sell it you get your money
Where are stocks (part-ownership of companies) sold and traded?
Stock market
Aka
Stock exchange
Several different stock markets
