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econ midterm
| Question | Answer |
|---|---|
| scarcity | we have unlimited wants but limited resources |
| factors of production | land, labor, capital, entrepreneurship |
| land | All natural resources that are used to produce goods and services |
| labor | Any effort a person devotes to a task for which that person is paid |
| two types of capitral | physical capital, human capital |
| physical capital | Any human-made resource that is used to create other goods and services |
| human capital | Any skills or knowledge gained by a worker through education and experience |
| entrepreneurship | Ambitious leaders that combine the other factors of production to create goods and services. |
| microeconomics | Study of small economic units such as individuals, firms, and markets. |
| macroeconomics | Study of the large economy as a wholeor economic aggregates. |
| opportunity cost | most desirable alternative given up when you make a choice. |
| characteristics of free-market economy | 1. little government involvement. 2. Individuals OWN resources and The opportunity to make PROFIT gives people INCENTIVE to produce quality items efficiently. 3. Wide variety of goods available to consumers. |
| more characteristics of free-market economy | self-interest work together to regulate the economy |
| invisible hand | The concept that society’s goals will be met as individuals seek their own self-interest. |
| characteristics of command economy (communism) | 1. There is little incentive to work harder and central planners have a hard time predicting preferences. 2. the government also owns all the resources |
| mixed economy | 1. individuals own the resources. 2. the government regulates the production and distribution of many goods/service. 3. individuals and the government answers the three economic questions |
| three economic questions | 1. What goods and services should be produced? 2. How should these goods and services be produced? 3. Who consumes these goods and services? |
| demand | is the different quantities of goods that consumers are willing and able to buy at different prices. |
| law of demand | There is an INVERSE relationship between price and quantity demanded. |
| ceteris paribus | all other things held constant |
| what shifts demand | 1. Tastes and Preferences 2. Number of Consumers 3. Price of Related Goods 4. Income 5. Future Expectations |
| what is supply | the different quantities of a good that sellers are willing and able to sell (produce) at different prices. |
| law of supply | There is a DIRECT (or positive) relationship between price and quantity supplied. |
| what shifts supply | 1. Prices/Availability of inputs (resources) 2. Number of Sellers 3. Technology 4. Government Action: Taxes & Subsidies 5. Expectations of Future Profit |
| equilibrium | a state in which opposing forces or influences are balanced. |
| disequilibrium | a state within a market-based economy in which the economic forces of supply and demand are unbalanced |
| price ceiling | Maximum legal price a seller can charge for a product. Goal: Make affordable by keeping price from reaching Eq |
| price floor | Minimum legal price a seller can sell a product. Goal: Keep price high by keeping price from falling to Eq |
| subsidy | A per unit payment to producers |
| excise taxes | A per unit tax on producers |
| regulations | A system of rules for businesses established by the government |
| fixed cost | Costs for fixed resources that DON’T change with the amount produced |
| variable cost | Costs for variable resources that DO change as more or less is produced |
| total cost | Fixed costs plus variable costs |
| marginal cost | Additional costs of an additional output. |
| profit maximizing rule | MR=MC |
| revenue and profit | total revenue = price x quantity profit = total revenue - total cost |
Created by:
Ben Piunti