My Review Sheet.... jic

Scarcity & Shortage unlimited demands, limited supply/ temporary demand greater than supply
Factors of production anything that goes into the production of g&s Land natural resources/raw materials Labor workers/effort Physical+Human capital anything man made used to produce something else/knowledge and kills workers brig or gain through education, training, experience Entrepreneurship willingness to take risk, most important attribute
3 Economic Qs what should be produced? How it should be produced? For whom?
Opportunity Cost/Benefit what you give up, next best alternative
Thinking at Margin making decisions based adding/subtrc ONE unit
Marginal Cost/Benefit cost of producing one more unit of a good
Technology change in this brings economic growth
Underutilization not using resources to full potential
Efficiency maximize resources
Production Possibilities Curve/Frontier/Graph alternate way to use economy resources, trade-off/line
Shifting Curves left/right right=growth, left=decline
Guns v Butter produce military or consumer goods
Traditional Economy relies on habit, custom (agriculture)
Command or Centrally Planned when government controls economy
Adam Smith “Wealth of Nations” economist, came up with idea of free market
Profit Motive people take risks for profit
Specialization choose one thing to do well on
Competition rivalry among sellers to attract customers
Invisible Hand theory gov doesnt have to tell business to fix themselves (problem will correct itself)
Laissez Faire gov should not intervene in market place
Standard of Living level of economic prosperity
Externalities negative result of business (pollution)
Market or Free Economy decisions based on voluntary exchange in market, by people
Wage v. Salary hourly/contract (usually by year)
Circular Flow of Business Firms- Gov – House (how money travels)
Mixed Economies communism, capitalism, democratic
Transitional Economies working away from centrally planned toward free market
Socialism v Communism mixed economy, elected gov create greater equality/strive for economic & political equality
Law of Demand price ^ demand v; price v demand ^
Substitute goods/effect alternative goods (new car v used car), good elastic if there are substitutes
Complementary goods/effect used at the same time, if 1 good ^ in price complement suffers
Market + Individual curves/schedule market represents all producers, ind is one household
Normal v Inferior Goods good consumers demand more of when income increases; good consumers demand less of when income increases
Elastic, Inelastic, Unitary very sensitive to change in price, demand doesn’t change no matter price, demand change is equal in price change (1)
Equilibrium/Market Price pt quantity demanded and quantity supplied is equal/price of g+s at which this occurs
Luxury v Necessity what is comfortable/elastic (nice car, designer clothes) and what is needed/inelastic (milk)
Law of Supply suppliers offer more of a good at a higher price
Elasticity of Supply measure of way quantity supplied reacts to change in price
Supply Shock sudden shortage of a good
Business cycle period of macroeconomic expansion followed by period of contraction
Expansion, peak, contraction, trough economic growth/highest pt/economic decline/lowest point
Recession prolonged economic contraction (3 months)
Depression long and severe recession
Great Crash stock market collapse 1912
Private v Public Sector portion of economy controlled by household/firms, portion controlled by gov
Social Security FDR 1935, retirement fund
Medicare med insurance for elderly and disabled
Medicaid med insurance for poor
Rationing system allocating scarce goods and services using criteria other than price (WWII)
Safety Net gov way of taking care of its citizens
Fringe Benefit payment not in form of $$ (health care, company benefits, etc)
Eminent Domain gov seizes person’s property for public use (build roads, etc), it must fairly compensate that person
Privatization gov sells its assets/factors production, command to free market
Nationalization when gov takes/seizes property, free market to command
Deregulation removal of gov restrictions on business
Public Goods good supplied by gov, paid through taxes
Economies of Scale factors that cause producers average cost per unit to fall as output rises
Diminishing Marginal Return level of production in which marginal product of labor decreases as number of workers increases
Disequilibrium describes any price or quantity not at equilibrium
Price Ceiling max price that can be legally charged for good or service
Price Floor minimum price for a good or service
Minimum Wage lowest pay per hour allowed in state, ex of price floor
Rent Control price ceiling on rent
Black Market market in which goods are sold illegally
Sole Proprietorships business owned + managed by single individual
Partnerships business or organization owned by 2 or more persons who agree on specific division of responsibilities and profits
Corporations legal entity owned by individual stockholders
Closely held v Public Corporations issues stock to only few people, family/sells stocks on open market
Non-profit organizations doesn’t operate with purpose of generating profit
Perfect or pure Competition market structure which a large number of firms produce same product
Fixed & Variable costs cost doesn’t change, no matter how much of good produced (rent, salaries, taxes); cost rises or falls depending on how much is produced (raw materials, wages, electricity)
Total Revenue total amount of money firm receives by selling g&s
Profit financial gain
Monopolistic competition many companies sell products that are similar but not identical
Monopoly market dominated by a single seller (prescription drugs)
Price Discrimination division of customers into groups based on how much they will pay for a good
Natural monopolies market runs more efficiently when one large firm supplies output (public water)
Oligopoly market structure in which few large firms dominate the market (four)
Sheran antitrust Act outlaws mergers and monopolies that limit trade between states, 1890
Celler-Kefauver Act allows gov to stop mergers that could hurt competition
Merger combination of 2 or more companies
Horizontal Merger combination of 2 or more firms competing in same market w same g+s
Vertical Merger combination of 2 or more firms in different stages of producing same g+s
Conglomerate business combination merging more than 3 businesses that make unrelated products
Patent license that gives inventor exclusive rights to sell it for a period of time
Copyright grants author exclusive rights to publish/sell their work
Trademark brand
Franchise right to sell a good or service within an exclusive market
Royalties share of earnings given as payment
Labor Force nonmilitary people who are employed/unemployed
Wage discrimination people get paid less due to gender/age/ethnicity etc
Glass ceiling invisible barrier that prevents women/minorities from advancing in business world
Blue collar/white collar industrial job, wage/professional job, salary
Labor unions better working conditions, better hours, better pay
Collective bargaining right of labor union to represent all workers in a given firm when negotiating with employer over issues
Arbitration meet, court ordered or both sides consent, final decision legally enforceable
Mediation meet, neutral 3rd party, recommendations not binding
Strike organized work stoppage, force employer to address union demands
Injunction formal command
Lockout company close for period of time to break union, the longer close the harder on workers, workers return for lower wages, union usually abandoned
Black list list of troublemakers between companies (kept “problem” workers from getting hired)
Temporary /Contingent employment part-time/temporary job (usually white collar)
Unskilled, semiskilled, skilled, professional no special training/skill, lot supply short demand, low wage (cashiers)/some training, lot supply moderate demand, moderate wage (truck driver)/special training, less supply more demand, good pay (electrician)/advanced train/skill, low supply high demand, very good pay (doctor)
Barter system exchange g+s of equal value, old system, not convenient
6 characteristics of money durable (withstand wear and tear) portable (easy to carry) divisibility (can you make change) uniformity (must look same, recognizable) limited supply (the more exists, value goes down) acceptability (someone takes it)
Commodity money $$ that has value (ex. Cocoa beans, tobacco in Georgia )
Representative money piece of paper that stands for something else
Fiat money money that isn’t backed by gov says it has value
Inflation decrease in value of $$
Deflation increase in value of $$
Banks institution for receiving, keeping, and lending money
Liquidity ability to be converted to cash
Federal Reserve System first central bank, bank for banks
Reserve Requirements % banks must hold on to
Monetary Policy 1.raise or lower interest rate 2.increase/decrease $ supply 3.increase/decrease reserve requirement
M1 and M2 m1 money easily accessible, liquidity; m2 near money
Simple interest principal x rate as dec x # years
Compound interest principal x 1.int rate ^ # years
Effect of compounding more you compound, more money you make
Diversification when you invest in different areas
Blue chip stocks well established companies, pay dividends, gradual growth, safe
Income stocks pays regular dividend
Growth stock sell to make profit
Preferred stock stated dividend
Common stock gives holder right to vote
Portfolio collection of assets
Prospectus how a bond or stock has done in the past 5 years
Capital gain or loss total financial gain/loss
Stock split stock gets expensive, so it gets split
Bull or bear market steady rise in stock market/steady drop in stock markt
Moody’s/S&P Aaa-high, D-low / AAA, safe BB-, bankrupt C, default D
Dividend profits paid out to stockholders
Risk & Liquidity affect on return bonds safe= low interest; risky= high interest; more liquid, lower interest rate, less liquid=higher interest
Savings bonds low denomination bonds issued by the US government, and have no risk of default. The money from these bonds is used for public works projects.
Municipal bond bonds issued by a state or local government to finance improvements such as highways, schools, parks, etc
T Bill/T Note/T Bond less than 1 yr/2yrs-10yrs/10-30 yrs
Junk bond low rated and potentially higher-paying bonds. There is a higher risk involving buying these bonds (it is probable they will default), but the rewards are much greater
Durable /Non durable goods last for long time (cars, fridge)/ don’t last long
Depreciation decline in value of an asset over time
Excise Tax tax on production or sale of a good
GDP gross domestic product, total value of g&s produces in one year c+i+g+(x-m)