Social Studies - Economics Flashcards
the study of how goods are produced, distributed, and consumed
economics
although the resources available can differ from person to person, no human has all of the resources necessary to fulfill every one of his needs and desires
scarcity
trade-offs and decisions as to best allocate their resources
cost-benefit analysis
not about money, but about the general use of resources; refers to the cost of the next best-forgone opportunity ; because all resources are scarce, all actions have an opportunity cost
opportunity cost
holds that the more gold a nation has, the better and stronger its economy and global power; views the world as having a finite amount that all nations must share; created an inherently competitive global economy ; a nation’s wealth is determined by the amount of its exports compared to its amounts of imports
mercantilism
structure focused on enriching the parent country- even at the expense of colonies; colonies were not encouraged to trade with other countries just the parent country; focused heavily on exporting more than importing
national economy
3 types of economic systems developed to manage the flow of goods:
Capitalism, communism, socialism
economic system where the means of production (resources used to produce goods) are privately owned and operated to make a profit, marker economy where free individuals use their resources to dictate price, demand, quality, and quantity through the purchasing of product; freest/ least regulated type of economy; greater social mobility
Capitalism
father of capitalism, wrote “an inquiry into nature and causes of wealth and nations”; said mercantilism did not maximize best interest of he individual or country; argued that when individuals seek their own interest, an invisible hand guides the economy to its greatest productivity; revolutionized economic thinking
adam smith
states that the economy is not led by an entity, but rather it is the result of the collusion of individuals acting in their own self interest (capitalism)
invisible hand theory (adam smith)
- economic system where the state owns all of the means of production and manages it in order to ensure everyone benefits equally from the economy
- seeks to eliminate classes by establishing popular ownership of the means of production
- eliminates need for wages and private property
communism
communism originated with the publication of Communist Manifesto by
Karl Marx
- economic system in which the people, represented by the government, control the means of production
- spectrum with most countries falling somewhere along it
- refers to public ownership of resources and allocation of those resources by the government to best meet the demands of society
- falls between capitalism and communism because although government controlled, the functioning of the economy, market decide or measure, and allocation of goods
- characterized by high taxes, redistribute wealth from the rich to the poor, and complex tax systems to create financial incentives
- goal in socialism is to eliminate or minimize social classes and poverty ; gov provides many basic necessities of life and heavy regulation is placed upon the economy c
Socialism
space in which goods are exchanged
market
market where products are almost exactly the same and there are infinite competitors
pure competition (perfect competition)
market where many firms are present and the distinction of the products results in increased prices that drives innovation
monopolistic competition
market where only a few sellers are present
oligopoly
market where one firm controls the price, production, and supply of a good
monopoly
price is determined by two factors
supply and demand
states that as the price of a good increases, the less quantity will be demanded for the good
law of demand
states that as the price of a good increases, the more quantity will be supplied of the good
law of supply
a market is considered to be in _____ when the quantity supplied is equal to the quantity demanded
equilibrium
price results in a quantity supplied greater than a quantity demanded
surplus
quantity demanded exceeded the quantity supplied
deficit
The more elastic a demand or supply curve,
the steeper the slope, the more fluctuations in price impact supply or demand
exchange of products for money
trade
ability by an entity to produce more of a good or service than another entity using the same amount of resources
absolute advantage
the ability of an entity to produce a good or service at a lower opportunity cost than another entity
comparative advantage
comparative advantage leads to
specialization
results in the greatest economic productivity
division of labor
the ability for one country to trade with another without hindrance so that all goods can be produced with the greatest efficiency
free trade
any obstacle to trade
trade barriers
a limit to the amount of good that can be imported or exported (trade barrier)
trade cap
government payments to an industry to reduce costs or create false demands (trade barrier)
subsidies
a maximum price set by the government allowed to be charged for a particular good (trade barrier)
Price controls
a tax on imports or exports (trade barrier)
Tariffs
- can dictate how a market responds to an imported good
- are instituted for 2 reasons: generate revenue for a gov and protect a domestic market from foreign competition
Tarrif
has a value established against gold or another precious metal ; not prone to fluctuations as they are tied to the price of precious metals
Fixed currency
priced in relation to the values of other currencies; gov can increase or decrease the supply of a currency
Floating currency (what most currencies are today)
- unprecedented increase in economic productivity during the 1900s
- directly responsible for the rise of the standard of living in the US and other developed nations, the rise of city populations, and an increase in governmental activity in individual lives
Industrial Revolution
- The rapid economic expansion of the Industrial Revolution also led to an increase in the difference between the haves and the have nots as well as the growth of oligopolies and monopolies
- reformers began to question the benefits of fully free market, leading to government regulation of industry
- Sherman Antitrust Act: allowed governments to investigate, regulate, and control large companies for purpose of preventing circumstances that restrict competition in the US
Progressive Era
- Overspeculation, rampant credit, and the largest tariff act ever in the US (Hawley-Smoot Tariff) led to unprecedented period of deep economic depression that lasted throughout the 1930s
- paralyzed global trade
- led to another burst of government regulation of industry and safeguards built into the economy to prevent another fall
The Great Depression
-British econominst (John Maynard Keynes) advocated that free markets can lead to economic inefficiencies and governmental intervention can lead to a stable, productive economy; promoted a mixed economy of free markets and governmental intervention
Keynesian Economics
US became the industrial workhorse and breadbasket of the world
World Wars
- examines the economy as a whole, rather than looking at the function of specific markets
- used to compare the economies of various countries and to understand the function and growth patterns of a whole economy
Macroeconomics
total value of all domestic production in a country ; only takes into consideration products at final sale
Gross Domestic Product
similar to GDP, except that its emphasis is on the productive output of the citizens of a particular country ; so it adds in any money made by citizens overseas and subtracts production of non-citizens living and working within a country
Gross National Product
uses consumer spending as a measure of the strength of an economy
Consumer Price Index (CPI)
natural increase in prices over time; takes place when the equilibrium point of an economy is above the production capability of that economy at full employment
inflation
harmful to an economy; when overall price of goods and services in an economy decreases ; results in increased unemployment and overall demand is low
deflation
small percentage of the company
share
percentages of the profit
dividends
market in which publicly held shares of various companies are traded
stock market
higher employment percentage means a higher level of production; when it decreases, it means that demand and production have decreased
Empolyment percentage
