Stack #204608
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| Freedom of Enterprise | Ensures that entrepreneurs and private businesses are free to obtain and use economic resources to produce their chose of product and to sell them in their chosen markets.
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| Freedom of Choice | Enables to employ or dispose of their property as they see fit.
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| Competition | Is freedom of choice exersized in pursuit of a monetary return.
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| specialization | is the use of resources of an individual, firm, region, or nation to produce one or a few goods or services rather than a range of goods and services
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| human specialization or the division of labor | makes differences in abiliy
fosters learning by doing
saves time
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| Five Fundamental question | What goods & services will be produced
How will the goods and services be produced
who will get the goods and services
how will the system accomidate change?
how will the system progress
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| Self interest | simply means that each economic unit that tries to achieve its own particular goal, which usually requires to deliver something of value to others
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| The functional distribution of income | indicates how the nations earned income is apportioned among wages, rents, interest, and profits, that is according to the function performed by the reciever.
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| Personal distribution of income | indicates how the nation's money is divided among households.
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| 2005 disposition of household income | 88% personal consumptions, 12% personal taxes, >0% savings.
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| durable goods | are things purchased that have a life of 3 rs or more.
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| nondurable goods | are things purchased that have a life of less than 3 yrs.
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| law of demand | All else equal, as price falls, the quantity demand rises, and as price rises, the quantity demanded falls. (inverse)
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| determinants of demand | 1. consumer tastes (preferences)
2. the number of buyers in the market
3. consumers' incomes
4. prices of related goods
5. consumer expectations
(right, increase of demand: left, decrease of demand; demand shifters)
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| supply | a schedule or curve showing the various amounts of a product that producers are wiling and able to make abailable for sale at each of a series of possible prices during a specific period.
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| law of supply | a supply schedule tells us that firms will produce and offer for sale more of their product at a high price than a low price
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| demand | a schedule or a curve that shows the various amounts of a product that the consumers are willing and able to purchase at each of a sereis of possible prices during a specified period of time
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| determinants of supply | 1. resources prices
2. technology
3. taxes and subsidies
4. prices of other goods
5. producer expectations
6. the number of sellers in the market
(left, decrease of supply: right, increase of supply; supply shifters)
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| surplus / shortage | excess supply (above equilibrium), excess demand (below equilibrium)
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| business population | plant, firm, industry (physical establishment, fabricating and distributing g&s) (business organization that owns and operates plants) (group of firms that produce the same, or similar, products)
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| legal forms of business | sole proprietorship (a business owned and operated by one person), partnership (a business organization that two or more individuals who agree to own and operate a business together), corporation
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| stock | a share in ownership of the corporation
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| bond | lending money to a corporation
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| redistributing income | transfer payments (welfare, medicare)
market intervention (price ceiling, price floors)
taxation (income tax)
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| negative & positive externalities | spillover to a third party without compenation, spillover to third parties or the community at large
legislation, taxes; subsidize consumers, subsidize suppliers, provide goods via govt
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| Economic Resources | Land
Labor
Capital
Entrepreneurial Ability
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| Assumptions of the production possibility curve | Full Employment
Fixed Resources
Fixed Technology
Two Goods
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| law of increasing oppertuinity cost | as the production of a particular good increases, the oppertunity cost of producing and additional unit rises
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| market system | capitalism, private ownership of resources and the use of markets and prices to coordinate direct economic activity.
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| oppertunity cost | what a person gives up to have/own something else
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| economic rationale | for the law of increasing opportunity cost is that all economic resources are not completely adaptable to alternative uses.
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| ownprice | price of product one deals with
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| price change | movement along the demand curve
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| optimal output | MB=MC Marginal Benefits = Marginal Cost
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