TEST 1 Flashcards
Types of Resources
Land. Physical Capital(Man made productions). Labor. Human Capital(Education). Entrepreneurial Ability
Types of Income
Wages. Interest. Rent. Profit
Positive Statement
Can be tested. Includes facts
Normative Statement
What should be (Value Judgments)
Opportunity Cost
Is the value of the best alternative given up when any item is chosen
Sunk Cost
A cost that has already been incurred. Money already spent
Absolute Advantage
Ability to produce a good using fewer resources
Comparative Advantage
Ability to produce a good at a lower opportunity cost
Demand:
The total amount of a good or service that consumers are willing and able to purchase
Stock Variable
Measured at a point in time
Flow Variable
Measured over a period of time. Example: Demand
Factors affecting Demand
Px, Y, Pop, Ps, Pc, T
Law of increasing opportunity cost
To keep increasing the amount of one product, the other product will increasingly go down
Factors affecting demand (Negative or Positive)
Px is negative. Y is both. Pop is +. Ps is +. Pc is negative. T is +
The law of demand
The negative relationship between Px and Qx
Normal Good
Demand that is positively related to income
Inferior Good
Demand that is negatively related to income
Change in Demand vs Change in quantity demanded
Change in Demand=Shift in curve
Change in quantity demanded=when Px changes
Supply
The amount of a good/service that firms wish to sell
Factors affecting Supply
Px, Pi, Tech, Sub, Tax
Factors affecting supply (Positive or Negative)
Px is +. Pi is neg. Tech is +. Tax is neg. Sub is +
Change in Supply vs Change in quantity supplied
Change in Supply= Curve shifts
Change in quantity supplied: When Px changes
Employed Person
Person who spent most of previous week at paid job
Unemployed Person
Person not employed but looking
Labor Force
Employed and unemployed
Unemployment Rate
Percent of labor force unemployed
Labor Force Participation Rate
% of adult pop that is employed or seeking employment
Discouraged Worker
Person who would like to work but has given up looking
Types of Unemployment
Seasonal, Frictional, Structural, Cyclical
Seasonal Unemployment
Unemployment caused by seasonal changes
Frictional Unemployment
Unemployment that occurs because it takes time to match up jobs with seekers. Inbetween jobs
Structural Unemployment
Unemployment that occurs because people dont have skills or live in wrong area
Cyclical Unemployment
Unemployments that result in movements in the business cycle. Example: Recession
Full Employment/Natural Rate of Unemployment
Rate with everything but cyclical
Underemployment
Workers are overqualified for their jobs
Underground economy
People who dont pay taxes
Inflation
Increase in average price level
Deflation
Decrease in average price level
Disinflation
When there is a positive rate of inflation but it is declining
Creeping Inflation
Prices are rising slowly
Hyperinflation
Prices rising dramatically
CPI
Indicates level of prices for consumer goods
GDP deflator
Indicates level of prices of all goods
PPI
Indicates level of prices of goods bought by firms
PCE
Based on actual consumption patterns
Nominal Interest Rate
Interest rate usually reported without corrects for inflation
Real Interest Rate
Interest rate corrected for effects of inflation
Economic Fluctuations (Business Cycle)
Rise and fall of economic activity around some long term trend
4 Basic Stages
Expansion, Peak, Recession, Trough
Recession
When production decreases for two quarters
Depression
Severe reduction in production longer than a year.
