section 1 Flashcards
Gross Domestic Product (GDP)
the market value of all new final goods and services produced inside a country during a given time period
what does economic activity revolve around?
production
short-run analysis
assuming that at least 1 thing remains fixed
long-run analysis
nothing remains fixed
what drives economic activity?
spending
GDP 2023
- US
- China
- Germany
- Japan
per capita GDP =
GDP/population
per capita GDP is rough estimate of 2 things:
productivity and income (standard of living
economics
the study of how society chooses to allocate its scare productive resources
productive resources
inputs to production
4 factors of production
labor, capital, land, entrepreneurial talents
who owns the factors of production?
people/households
what is the fundamental economic problem facing society?
scarcity of resources
economy
a particular system of organization for production, distribution, and consumption of goods and services
economic systems
centrally planned economies, market economy, mixed economies
centrally planned economies
resources are allocated by way of a centrally planning agency of the government
market economy
resources are allocated by of way of individual buyers and sellers
mixed economies
employ elements of both central planning and market allocation of resources
opportunity cost
what is given up whenever a choice is made
production possibilities curve (PPC)
a curve made up of points that represent the maximum combination of goods and services an economy can produce with existing resources and technology
assumptions in the construction of the PPC:
- production is limited to two types of goods and services
- all resources are efficiently employed
- all resources are fixed
- all technology is fixed
the PPC illustrates:
- points of efficient, inefficient, and unattainable level of production
- product mix
- opportunity cost
- economic growth
- law of increasing opportunity cost
economic decision makers
- households (consumers)
- firms (businesses)
- governent
- foreign sector
household are referred to as
utility maximizers
utility
satisfaction from consumption
rational
intentionally making decisions that make you better off
households buy 2 categories of things
goods and services
business structures
- sole proprietorship
- partnership
- corporation
3 levels of government
federal, state, local
tax systems
progressive tax system, regressive tax system, proportional tax system (flat tax)
progressive tax system
the percentage of your income paid in taxes goes up as your income goes up
regressive tax system
the percentage of your income paid in taxes goes down as your income goes up
proportion tax system (flat tax)
all tax payers pay the same percentage of their income in taxes
marginal tax rate
the tax rate of the next dollar of taxable income
average tax rate =
tax/taxable income x 100
