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Micro Economics How consumers and producers affect the market through supply and demand.
Supply and Demand Theory that the rate of the supplies of goods and services adjusts at the same rate as the demand for them.
Equilibrium Price The price consumers are willing to buy and producers sell at.
Opportunity Cost The loss of potential gain from one choice when another choice is made
Fixed Cost Business costs that are constant whatever the quantity of goods are services are produced (salaries, rent, insurance, taxes)
Variable Cost Costs related to the quantity produced (materials, transportation, hourly workers)
Total Cost Fixed and variable costs
Marginal Cost The cost added by producing more. How the variable costs affect the total cost.
Production Possibilities Frontier A graph showing all combinations of output of 2 goods that can be produced with available resources. Scarcity + choice + opportunity cost. (Guns and butter)
Normal Profit When total profit minus costs is $0
Accounting Profit True revenue. Found by total revenue minus the dollar costs.
Economic Profit Total revenue minus all costs
Law of Diminishing Returns The point at which the profits gained is less than the amount of money or energy invested. (Happens when marginal cost rises)
Incentives Monetary, Non-Monetary (moral), Coercive
"Wealth of Nations" Adam Smith, the Found of Economics. The invisible hand guides individuals to act in their best interest, which then promotes society's interests.
Macro Economics Study of the total behavior plus structures of the economy
Monetary Policy Decisions made by the Federal Reserve for interest rates, controlled by the flow of cash.
Fiscal Policy President and Congress decide on budgets, unemployment, borrowing, interests, social security, and Medicare
Liberal Property Rights private property
Socialist Property Rights some public property
Communism Community-held property
Planned Economies Government run
Market Economies Capitalism. Individuals and firms make most decisions. Ruled by Supply/Demand and labor division. Resources must be productive to be rewarded.
Traditional Economies tribe bartering
GDP Gross Domestic Product. The monetary value of all goods/services made within a country. Economic output in 1 year.
GNP Gross National Product. GDP + the value of products made outside the country's borders
Stock Market buy, sell, and trade stocks to increase capital
Commodities Market buy, sell, and trade products; distribute commodities
Derivatives Markets Contract agreement to distribute risk through forwards, futures, options, and swaps
Price Floor Artificially imposed minimum price that creates a labor surplus (minimum wage)
Price Ceiling Artificial cap on the price of a good resulting in lower prices, but higher wait times (rent control)
Price Index Change in prices of certain goods and services in a period of time
Economic functions of a government Regulate, tax, finance the government
Fiscal Expansion Congress and President spend more than income (debt)
Monetary Expansion Federal Reserve increases the total supply of money
Fiscal Contractionary Congress and President spend less than income (surplus)
Monetary Contractionary Decrease the supply of money
Interest Rates Measure the supply of money in the economy, a tool to control the supply
Knights of Labor 1869, First major national union
American Federation of Labor 1886, founded by Samuel Gompers as a craft union of skilled laborers
Congress of Industrial Organizations 1938, industry-wide with skilled and unskilled workers
AFLCIO Merger of American Federation of Labor and Congress of Industrial Organizations in 1955
Comparative Advantage Ability of one country to produce goods and services at a lower opportunity cost than another. Benefits the domestic economy by lowering the cost of production.
Protectionism The government's use of trade barriers to limit foreign imports
Dumping Lower the price of exports to unfairly gain a share in a foreign country
NAFTA 1994, North American Free Trade Agreement established free trade zones in much of US, Canada, and Mexico
GATT 1947-1995, General Agreement on Tariffs and Trade to strengthen trade cooperation post WWII.
WTO World Trade Organization replaced GATT in 1995 to promote free trade and globalization
Balance of Trade Country A may buy more from Country B than it sells (deficit) but sell more to country C than it buys (surplus)
Pegged/Fixed Exchange Rate Set at a relative rate to another currency for stability, but prevents effective competition
Flexible/Free Exchange Rate Allowed to float against another currency based on supply in demand. Used in world trade.
Economic Distribution Distribution of total income among individuals or factors of production.
Price Control Restrictive law setting how high or low a market price may go.
Combat Inflation Increase taxes, decrease government spending
Globalization Internet, collapse of USSR, opening of China to capitalism
Import Taxes Primary source of US government founding until the early 20th century
Appreciation Increase in value over time
Excise tax A tax on a certain good
Created by: johea
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