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Econ Final
| Question | Answer |
|---|---|
| Opportunity cost | The most desirable alternative given up as the result of a decision |
| Goods | The physical object that someone buys |
| Economics | The study of how people seek to satisfy their needs and wants by making choices |
| Shortage | A situation in which people want more of a good or service than producers are willing to supply at a particular price |
| Labor | The effort people devote to tasks for which they are paid |
| Land | All natural resources used to produce goods and services |
| Capital | Any human-made resource that is used to produce other goods and services |
| Services | The actions or activities that one person performs for another |
| Need | Something essential for survival |
| Wants | Something that people desire but that is not necessary for survival |
| Human Capital | The knowledge and skills a worker gains through education and experience |
| Entrepreneur | a person who decides how to combine resources to create goods and services |
| Factors of production | Land, Labor, Capital |
| Efficient | What you call an economy that is producing the maximum amounts of goods and services |
| Production Possibilities Frontier | A line on a production possibilities curve that shows the maximum possible output an economy can produce |
| What does an entrepreneur do? | Develop original ideas, start businesses, create new industries, and fuel economic growth |
| Safety Net | A set of government programs that protect people who face unfavorable economic conditions |
| Incentive | The hope of reward or fear of penalty that encourages a person to behave in a certain way |
| Communism | A political system where the government owns and controls all resources and means of production and makes all economic decisions |
| Socialism | A range of economic and political systems based on the belief that wealth should be evenly distributed throughout society |
| Centrally Planned Economy | An economic system in which the government makes all decisions on the three key economic questions |
| Traditional Economy | An economic system that relies on habit, custom, or ritual to decide the three key economic questions |
| Laissez-faire | The doctrine that government should not intervene in the marketplace |
| Capitalism | An economic system based on the private ownership of the means of production, with the goal of making a profit |
| Free enterprise system | An economic system characterized by private or corporate ownership of capital goods |
| Mixed economy | a market-based economic system in which the government is involved to some extent |
| Privatization | Process of selling businesses or services operated by the government to individual investors, and then allowing them to compete in the marketplace |
| Private Property | Property that is owned by individuals or companies, not by the government or people as a whole |
| Karl Max | *German philosopher Government should control factors of production and divided the wealth evenly among all |
| Adam Smith | People should be free to produce and sell products at a profit |
| In what way does the free market encourage individuals to be successful? | *It encourages individuals to succeed because it allows for specialization and competition |
| How has specialization affected the American economy? | It makes products or services suited to its natual and human resources, exports them to other countries and imports goods and services it does not produce...It depends on other countries to buy and sell goods to survive |
| Why have free market economiew ben more successful than centrally planned(command) economies? | It promotes competition which is an incentive to succeed |
| Three economic questions | * What to produce...*How to produce it...*Who gets goods and services |
| Macroeconomics | The study of economic behavior and decision making in a nation's whole economy |
| Microeconomics | The study of the economic behavior and decision making in small units, such as households and firms |
| Market Failure | A situation in which the free market, operating on its own, does not distribute resources efficiently |
| Social Security | A federal insurance program that provides benefits to retired persons, the unemployed, and the disabled. |
| Medicare | A federal system of health insurance for people over 65 years of age and for certain younger people with disabilities. |
| Medicaid | A federal system of health insurance for those requiring financial assistance. |
| Eminent domain | The right of a government to take private property for public use |
| Copyright | A government license that grants an author exclusive rights to publish and sell creative works |
| Patent | A government license that gives an inventor the exclusive right to product and sell a product |
| GDP | Gross Domestic Product - the total value of all final goods and services produced in a country in a given year |
| Public Sector | The portion of the economy that involves the transactions of the government |
| Private Sector | The part of the economy that involves the transactions of individuals and businesses |
| In-kind benefits | Goods and services provided for free or at greatly reduced prices |
| How do economists determine the poverty threshold? | Economists use current food costs to calculate how much it would cost to feed a family of four for one year and then multiplies it by three. |
| Why is private property important in a free market society? | The availablity to own private property instills the need for competition (the invisible hand) in the market |
| Law of Demand | Consumers will buy more of a good when its price decreases and less when its price increases |
| Law of Supply | Producers will offer more of a good as its price increases and less as its price falls |
| Elastic | Demand that is very sensitive to a change in price |
| Inelastic | Demand that is not very sensitive to price change |
| Substitution effect | Consumers react to an increase in a good's price by consuming less of that good and more of a substitute good |
| Subsidy | Government payment that supports a business or market |
| Excise Tax | Tax on the production or sale of a good |
| Regulation | Government intervention in a market that affects the production of a goood |
| What affect does regualtion have on the market? | It requires companies to fully disclose information-that way the entire market is informed-the result is a greater willingness of firms and people to invest |
| Elastic goods | Goods who's price is very sensitive to the change in demand-price goes up when demand increases-goes down when demand decreases |
| Inelastic goods | Goods who's price is steady no mater the demand-demand has very little effect on price of goods |
| What effect does a good being elastic or inelastic have on the price of the good? | If it is elastic the price fluctuates with the demand-if it is inelastic the price is constant no matter the demand |
| Minimum wage | Minimum price an employer can pay a worker for an hour of labor |
| Wquilibrium | The point at which the demand for a product or service is equal to the supply of that product or service |
| Disequilibrium | Any price or quantity not at equilibrium: when quantity supplied is not equal to the quantity demanded in a market |
| Surplus | When quantity supplied is more than quantity demanded |
| Shortage | Quantity demanded is less than quantity supplied |
| Rationing | Allocating scarce goods and services using criteria other than price |
| Effect disequilibrium has on the market? | It causes a shortage or a surplus |
| How does the market balance itself? | Sellers will cut back on the amount produced and lower prices to entice buyers; profit seekers will realize an area of shortage in the market and raise prices to make more profit |
| What is the effect of rent control and minimum wage on the market? | Rent control prevents inflation during housing crisis-minimum wage ensures sellers receive at least minimum reward for their efforts |
| currency | Coin and paper bills used as money |
| Barter | The direct exchange of one set of goods or services for another |
| Commodity money | Objects that have value in and of themselves and that are also used as money |
| Representative money | Objects that have value because the holder can exchange them for something else of value |
| Fiat money | Objects that have value because the government has decreed that they are an acceptable means to pay debts |
| Interest | The price paid for the use of borrowed money |
| Foreclosure | The seizure of property from borrowers who are unable to pay back their loans |
| What type of money does the United States have? | Fiat money |
| Stock market | A market where stocks and bonds are traded |
| stock | A certificate of ownership in a corporation |
| Investment | Act of redirecting resources from being consumed today so that they may create benefits in the future; the use of assets to earn income or profit |
| Portfolio | Collection of financial assets |
| Bull market | A steady rise in the stock market over a period of time |
| Bear market | A steady drop or stagnation in the sock market over a period of time |
| Capital gains | Difference between the selling price and purchase price that results in a financial gain for the seller |
| dividends | The portion of corporate profits paid out to stockholders |
| Corporation | A legal entity, or being, owned by individual stock holders, each of whom has limited liability for the firm's debts |
| Why is investing an essential part to free enterprise? | It promotes economic growth |
| Why do businesses sell stock of themselves? | To raise capital |
| W-2 | A form used to report wages, taxes, tips and other employee compensations, withholds of federal taxes, state taxes, medicare, social security, etc. to the federal and state government |
| CD | Certificate of Deposit |
| Money Market Account | Market in which money is lent for periods of one year or less |
| Savings Account | Holds income not used for consumption |
| Gross Pay | Salary before taxes have been taken out |
| Net Pay | Salary after taxes have been taken out (take home pay) |
| BTU | british Thermal Unit- the quantity of heat needed to raise the temperature of one pound of water one degree |
| Mortage | specific type of loan that is used to buy real-estate |
| What is typically withheld from a pay check? | Federal Income tax, social security, medicare, state income tax |
| How do banks make money? | People deposit money into saving accounts, banks use these funds to loan money to borrower charging them interest on the money, a small portion of the interest goes to the saver the rest to the bank |
| GDP | Gross Domestic Product - the dollar value of all final goods and services produced within a country's borders in a given year |
| CPI | Consumer Price Index - Price index is determined by measuring the price of a standard group of goods meant to represent the "market basket" of a typical urban consumer |
| Inflation | A general increase in prices across an economy |
| Deflation | A sustained drop in the price level |
| Progressive tax | A tax for which the percentage of income paid in taxes increases as income increases |
| Flat (proportional tax) | A tax for which the percentage o income paid in taxes remains the same at all income levels |
| Regressive tax/sales tax | A tax for which the percentage of income paid in taxes decreases as income increases |
| Who does inflation favor, lenders or borrowers? | Favors borrowers by driving wages higher and allowing the borrower to pay back a fixed debt more quickly |
| Who does deflation favor? | Favors the lender because the value of the loan increases due to price deflation |
| What three programs are the largest expenditures for the Federal Government? | Medicare, Social Security, Defense |
| Human Capital | Skill and knowledge gained by a worker through education and experience |
| What do you call an economy that is producing the maximum amount of goods and services? | Efficient |
| Safety Net | Government programs designed to protect people from economic hardships |
| Incentive | Anything that offers rewards to people who change their behavior |
| Centrally planned economy | The government decides how much of each product to produce, how to produce the goods, and who gets the goods |
| Privatization | selling business of services operated by the government to individual investors, and then allowing them to compete in the marketplace |
| Karl Marx | Father of Communism, 19th century philosopher, political economist, sociologist.and revolutionary |
| Adam Smith | Wrote "The Wealth of Nations" where he wrote about how markets function, advocated Laissez-faire (Government not involving themselves in the economy) |
| In what ways does the free market encourage individuals to be successful? | It promotes competition between businesses, the only way to make money is to provide something people want, it doesn't care who provides the good or the service |
| How has specialization affected the American economy? | It leads to an efficient use of capital, land, and labor, when a person learns how to one or two jobs well they are more efficient at their job and are avoiding the waste of resources |
| Why have free market economies been more successful than centrally planned economies? | They have been more successful because they Because it encourages individually owned business, competition and consumer choices both of which are not encourages or practiced in a centrally planned economy |
| Market failure | A market left on its own fails to allocate resources efficiently |
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