Econ Final Exam
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| market equilibrium | A condition of price stability where the quantity demanded equals the quantity supplied.
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| equilibrium price | The price at which the quantity demanded and the quantity supplied are equal. (This is also known as Market Clearing Price)
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| surplus | When the quantity supplied is greater than the quantity demanded.
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| a surplus is represented by any point ... | above the equilibrium price.
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| The horizontal distance between the surplus point and the demand curve is the ... | quantity of the surplus
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| shortage | When the quantity demanded is greater than the quantity supplied.
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| a shortage is represented by any point ... | below the equilibrium price.
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| The horizontal distance between the shortage point and the demand curve is the ... | the quantity of the shortage
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| price ceiling | an artificial price set below the equilibrium price
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| price floor | an artificial price set above the equilibrium price
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| price control | when a government intervenes to regulate prices
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| supply curve | a graph of the relationship between the price of a good and the quantity supplied
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| supply schedule | a table that shows the relationship between the price of a good and the quantity supplied
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| Law of Supply | producers offer more of a good as its price increases and less as its price falls
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| Change in the cost of factors of production | If the prices of natural resources
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| Change in technology | New technology often reduces producers' costs
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| Change in profit opportunities producing other products | If a seller has an opportunity to produce a different product that brings in more profit
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| Change in producers price expectations | Producers expectations about the future price of the product they sell influence current supply.
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| Change in the number of sellers in the market | There is a direct relationship between the number of sellers of a good and the quantity that good that is produced
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| quantity supplied | the amount of a good or service that a firm is willing and able to supply at a given price
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| supply | The quantity of something that producers have available for sale at every price
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| Demand | Consumer willingness and ability to buy products
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| Law of demand | consumers buy more of a good when its price decreases and less when its price increases
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| Demand Schedule | table that lists a quantity of a good that a person will purchase at various prices in the market
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| Demand Curve | a graphic representation of a demand schedule
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| non-price determinant | Some factor that causes a shift in the Demand curve
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| Quantity Demanded | the amount of a good or service that consumers want at a given price (represented by a point on the curve)
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| production possibilities curve | A curve showing the different combinations of two goods or services that can be produced in a full-employment
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| Traditional Economy | economic system that relies on habit
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| market economy | Economic decisions are made by individuals or the open market.
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| command economy | An economic system in which the government makes all economic decisions.
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| mixed economy | an economic system combining private and public enterprise.
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| Adam Smith | Scottish moral philosopher and a pioneer of political economics. Seen today as the father of Capitalism. Wrote On the Wealth of Nations (1776) One of the key figures of the Scottish Enlightenment.
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| Karl Marx | 1818-1883. 19th century philosopher
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| marginal cost | the cost of producing one more unit of a good
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| marginal benefit | the additional benefit to a consumer from consuming one more unit of a good or service
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| thinking at the margin | the process of deciding whether to do or use one additional unit of some resource
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| goods | the physical objects that someone produces
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| Services | Actions or activities that one person performs for another; intangible
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| land | all natural resources used to produce goods and services
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| labor | the effort that people devote to a task for which they are paid
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| Capital | any human-made resource that is used to produce other goods and services
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| Entrepreneur | people who decide how to combine factors of production to create new goods and services
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| Trade-off | an alternative that we sacrifice when we make a decision
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| opportunity cost | the most desirable alternative given up as the result of a decision
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| trade | the action of buying and selling goods and services.
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| Barriers to trade | government rules that block or inhibit international trade between countries.
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| absolute advantage | the ability of an individual
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| comparative advantage | the ability of an individual
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| Specialization | the concentration of the productive efforts of individuals and firms on a limited number of activities
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| Depreciated Value | The original value of a property minus depreciation
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| exchange rate | the value of a currency in one country compared with the value in another
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| Imports | goods and services purchased from other countries
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| Exports | Goods and Services sold to other countries
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| Tariff | A tax on imported goods
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| revenue tariff | tax on imports used primarily to raise government revenue without restricting imports
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| Protective Tariff | A tax on imported goods that raises the price of imports so people will buy domestic goods
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| Quota | A limit placed on the quantities of a product that can be imported
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| Embargo | an official ban on trade or other commercial activity with a particular country.
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| fiscal policy | the use of government spending and revenue collection to influence the economy
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| Inflation | a general increase in prices and fall in the purchasing value of money.
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| progressive tax | A tax graduated so that people with higher incomes pay larger fraction of their income than people with lower incomes.
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| proportional tax | a tax for which the percentage of income paid in taxes remains the same for all income levels
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| regressive tax | A tax in which the burden falls relatively more heavily on low-income groups than on wealthy taxpayers.
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| demand-pull inflation | increases in the price level (inflation) resulting from an excess of demand over output at the existing price level
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| cost-push inflation | a sustained rise in the price level caused by a leftward shift of the aggregate supply curve (increase in cost of production)
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| Recession | a period of temporary economic decline during which trade and industrial activity are reduced
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| Depression | A long-term economic state characterized by unemployment and low prices and low levels of trade and investment
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| mandatory spending | Federal spending required by law that continues without the need for annual approvals by Congress.
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| discretionary spending | Federal spending on programs that are controlled through the regular budget process
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| social insurance programs | government programs that pay benefits to retired and disabled workers
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| public assistance programs | government programs that make payments to citizens based on need
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| monetary policy | managing the economy by altering the supply of money and interest rates
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| federal funds rate | Interest rate banks charge each other for loans
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| open market operations | the buying and selling of government securities to alter the supply of money
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| fractional reserve banking | a banking system that keeps only a fraction of funds on hand and lends out the remainder
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| discount rate | the minimum interest rate set by the Federal Reserve for lending to other banks.
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| expansionary monetary policy | Federal Reserve system actions to increase the money supply
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| reserve requirement | This is the percentage of their deposits that member banks must keep available in a Federal Reserve Bank.
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| contractionary monetary policy | the Federal Reserve's policy of increasing interest rates to reduce inflation
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| M1 | The most narrowly defined money supply
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| M2 | All of M1 + less immediate (liquid) forms of money to include savings
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| M3 | The broadest component of the money supply. Equal to M2 plus large time deposits.
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| GDP | Gross Domestic Product- the total market value of all final goods and services produced annually in an economy
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| CPI | (consumer price index) a measure of the overall cost of the goods and services bought by a typical consumer
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| unemployment | Measures the number of people who are able to work
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| Sole Proprietorship | a business owned and managed by a single individual
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| Partnership | a business organization owned by two or more persons who agree on a specific division of responsibilities and profits
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| Corporation | A business owned by stockholders who share in its profits but are not personally responsible for its debts
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| horizontal merger | the combination of two or more firms competing in the same market with the same good or service
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| vertical merger | the combination of two or more firms involved in different stages of producing the same good or service
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| conglomerate | a group of diverse companies under common ownership and run as a single organization
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| publicly held corporation | a type of corporation that sells stock on the open market
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| corporate charter | a legal document that the state issues to a company based on information the company provides in the articles of incorporation
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| articles of incorporation | a written legal document that defines ownership and operating procedures and conditions for the business
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| stock | A share of ownership in a corporation.
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| perfect competition | the degree of competition in which there are many sellers in a market and none is large enough to dictate the price of a product
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| monopolistic competition | a market structure in which many companies sell products that are similar but not identical
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| Oligopoly | a state of limited competition
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| Monopoly | A market in which there are many buyers but only one seller.
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| barriers to entry | obstacles to competition that prevent others from entering a market
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| Nash Equilibrium | a situation in which economic participants interacting with one another each choose their best strategy given the strategies that all the others have chosen
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| game theory | Evaluates alternate strategies when outcome depends not only on each individual's strategy but also that of others.
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| payoff matrix | a table that shows the payoffs that each firm earns from every combination of strategies by the firms
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