ECONOMICS | Perfectgrader

scarcity

There are fewer resources than are needed to fill human wants and needs.

Market Economy

An economic system in which people choose freely what to buy and sell

Command Economy

An economic system in which the government makes all economic decisions.

Traditional Economy

Goods and services are produced the way it has always been done

Mixed Economy

a mixing together of market and command systems

individuals have economic freedoms

government retains some control for benefit of citizens

Factors of Production

Land, Labor, and Capital

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Model of Choice

1. Individuals have unlimited wants. 2. Individuals can rank their preferences. 3. Individuals are rational utility maximizers.

Determinants of Demand

-Seasonality
-Prices of related goods or services. These are either complements or substitutes.
-Income of buyers.
-Tastes or preferences of consumers. (or trends)
-Expectations.
-Population

Determinants of Supply

-Production or input costs.
-Technology.
-Number of sellers in the market.
-Price expectations.
-Nature disasters, shocks to the market
-Government regulations (subsidies or taxes)

TERM

Supply

DEFINITION

Graphic representation of the relationship between product price and quantity of product that a seller is willing and able to supply.

LOCATION

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TERM

Demand Curve

DEFINITION

Graphic representation of the relationship between product price and the quantity of the product demanded.

LOCATION

TERM

Surplus

DEFINITION

Supply is greater than demand, or supply exceeds demand.

LOCATION

TERM

Shortage

DEFINITION

Demand is greater than supply, or demand exceeds supply.

LOCATION

TERM

Market clearing price/Price Equilibrium

DEFINITION

the price of a good or service at which quantity supplied is equal to quantity demanded

LOCATION

TERM

Price Ceiling

DEFINITION

a government-imposed price control or limit on how high a price is charged for a product. Governments intend price ceilings to protect consumers from conditions that could make commodities prohibitively expensive.

LOCATION

TERM

Price Floor

DEFINITION

A price floor is a government- or group-imposed price control or limit on how low a price can be charged for a product. A price floor must be higher than the equilibrium price in order to be effective.

LOCATION

Increase in Demand

Demand curve shifts to the right

Increase in Supply

Supply curve shifts to the right

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Decrease in Demand

Demand curve shifts to the left

Decrease in Supply

Supply curve shifts to the left

Opportunity Cost

This is the benefit that you have given up in order to pursue an alternative

Economics

the system that society uses to produce and distribute goods and services

Wants

are the things which people would like to have (car, cell phone)

Needs

are the things which people need to survive (food/water, shelter, clothing)

Goods

things that can be made or manufactured (tangible)

Capital goods

are the things used to manufacture other goods (tools)

Consumer goods

are goods meant to be sold to consumers for use (new house, cars, phones, appliances)

Services

work that is done for someone for a certain price (grass-cutting, nails done)

Normal Good

any good for which demand increases when income increases

Inferior Good

A type of good for which demand declines as the level of income or real GDP in the economy increases.

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Comparative Advantage

When one nation is better able to produce a good or service than another nation
Ex. Saudi Arabia => OIL

Productivity

is the amount of a good or service that can be produced in a given time

Law of Diminishing Returns

economic law that states that the level of return for additional labor or work will decrease at some point and continue to decrease
Costs (eventually) > Profit

Sole Proprietorships

business owned by a single person or a married couple

Partnerships

business owned by two or more people

Corporations

business that has many owners (stockholders)
sell stocks to investors
pay dividends to shareholders

stocks

pieces or shares of a company

Non-Profit Organizations

business that is organized to provide a service and not to make large profits for the owners
-many are charities or service groups

Business Cycle

The periodic and cyclical ups and downs of the economy

Standard of Living

A measure of quality of life based on the amounts and kinds of goods and services a person can buy.

Gross Domestic Product

the value of all goods and services produced in a nation in a given year

Inflation

A rise in the general level of prices in an economy.

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Fiscal Policy

Government efforts to influence the economy through taxation and spending

Keynesian Economics

The philosophy that government spending is needed to stimulate a sluggish economy

Trickle Down Economics

economic theory that tax cuts for the rich will trickle down and help everyone

Believed that economic growth depends on making increased amounts of capital available to business

Laissez-Faire

idea that the government will stay out of the interests of people and businesses

Monopoly

Complete control of a product or business by one person or group

expenditures

Government spending. Major areas of federal spending are social services and national defense.

Revenue

The money a government collects from taxes or other sources

Certificate of Deposit

a savings certificate that gains interest and has a set time before you can withdraw your money

Federal Reserve

The central bank of the United States and organization that prints money, tracks our economy and decides interest rates.

Progressive Tax

Any tax in which the rate increases as the amount subject to taxation increases. ( for Example: Income Tax)

Regressive Tax

A Tax in which the percentage of income paid in tax goes down as income rises (for example: Sales Tax)

Intergovernmental Revenue

Funds that one level of government receives from the other level of government

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Exports

Goods and Services sold to other countries

Imports

Goods and services brought into a nation from another country.

Deficit

The amount by which expenditures exceed revenue

Trade Deficit

An imbalance in international trade in which the value of imports exceeds the value of exports.

Global Interdependence

The reliance of people and countries around the world on one another for goods and services

Demand

Consumer willingness and ability to buy products at a given price.

Law of Demand

the law of demand states that,”conditional on all else being equal, as the price of a good increases, quantity demanded decreases; conversely, as the price of a good decreases, quantity demanded increases

Law of Supply

The law of supply is a fundamental principle of economic theory which states that, other factors held constant, an increase in price results in an increase in quantity supplied. In other words, there is a direct relationship between price and quantity: quantities respond in the same direction as price changes

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