Econ Final Notes PDF

1. Know the difference between micro and macroeconomics micro focuses on economic decisions as individuals and macro focuses on them as a whole 2. know the definition of economics The study of how people choose to use their limited resources to satisfy their ultimate Wants 3 Know the difference be...

1. Know the difference between micro and macroeconomics micro focuses on economic decisions as individuals and macro focuses on them as a whole 2. know the definition of economics The study of how people choose to use their limited resources to satisfy their ultimate Wants 3 Know the difference between shortages and scarcity A shortage is a temporary lack of something. Scarcity is long term 4. know command, traditional, and market economies Command decisions made by powerful users. Market: Decision-making individuals Traditional Economies: Decision-making by custom 5. know what type of economy the U.S. has Pure free enterprise 6 Knowing the conflict between resources and wants Resources are limited while wants are unlimited there will never be enough resources to satisfy everyone. 7.know the definition of utility Satisfaction one gains from consuming a product or service 8.know what perpetual, renewed, able, and nonrenewable resources are Perpetual: a resource that is always available, AKAsunrenewable things that you can replenish, such as TREES nonrenewable items that once used can never be replenished, such as OIL 9. know how capitalism raises the standard of living Provides new technology and competition 9. know why government intervention is necessary in binding contracts It is necessary because the government is required to have a legal system that ensures All sides must hold up their end to make these contracts. Such as receipts 10. know-how trade makes people better off economically It gives people more choices of goods and resources 11. know what a variable on a graph is The variable is a quantity that can vary or change 12. know what human capital is Knowledge and skills that people gain from education, on-the-job training,g and other experiences 13. know what a society has to do when determining how to use resources Society focuses on needs before wants 14.know the characteristics of the U.S. economy 1. Economic freedom 2. Competition 3. Equal opportunity 4. Binding contracts 5. Property Rights 6. Profit motive 7. Limited government 1 5. know what forces a tradeoff Scarcity forces tradeoff 16.know the definition of ceteris paribus All other things being equal. 17.know the definition of opportunity cost Any action is the value of the best alternative. 18.know the law of diminishing marginal utThe There more you consume something the less satisfaction you get 19. Definition of Demand: the quantity of a good/service that consumers are willing and able to purchase at various price 20. Relationship between price and supply: when prices are high; supply becomes high 21. What are elastic and inelastic goods: inelastic has a slight response to price change and elastic has a big response to price change 22. Know how specialization leads to trade: when you specialize in something you produce more than you need; so you begin to trade with others 23.What is Absolute Advantage: The condition that exists when someone can produce a good/service using fewer resources than somebody else 24.Definition of demand and Law of Demand: As the price of a good/service increases the demand decreases. As the price of a good/service decreases demand increases25.know the different Supply Shifters: Changing costs change in the number of producers, natural disaschangeschange in technology, changes in producer expectations (of prices), changes in government policy 26. know how to calculate elastic and inelastic goods: Calculating Elasticity of Demand Equation: Percentage change in Quantity Demand Demand = ______ Percentage Change iPricece Results: If results are less than 1 then it is inelastic; If results are higher than 1, then it's elastic 27.know the different Demand ShiftersChangesge in income, Changes in the numbers of consumers, Changes in taste and preferences, changes in consumer expectations, Changes in the price of substitute goods, Price of a complementary good 28. Definition of Supply and Law of Supply: As price increases Supply increases; as price decreases Supply decreases 29. Know what Economic Interdependence is: The characteristic of a society in which people rely on others for most of the goods and services they want it is a result of specialization and trade 3 0.know why businesses find demand schedules important: List the qualities of goods/services that one person will buy at various prices. 31. Know how trade creates more: expanding markets creates more employment opportunities in which goods/services can be sold it creates more mass production to make more goods/services at once which lowers the cost 32. know what dictates if a business enters the market: Market prices dictate Whether new businesses want to enter the market 33.know the economic idea behind trade and whether that makes people better off or not: Trade does make people better off it gives people good/resources for more choices 34.know what demand and supply curves are and what shape they can be: to predict how much supply is needed for the upcoming demand 35. what are the barriers to entering the market? - start-up costs - control of resources - technology 36. What are the functions of money? - medium of exchange - standard of value - store of value 37. why are savings so important for retirement? - life expectancy continues to go up - cost of living continues to rise - one form of retirement isn't enough 38. What causes shortages and surplus in a market? scarcity in a market is caused by prices being too low, bringing excess demand surplus in a market is caused by prices being too high, bringing excess supply 39. define market equilibrium as the point at which the quantity of a product demanded by consumers in a marker equals the quantity supplied by producers 40 How do you find price equilibrium and quantity equilibrium on a schedule quantity equilibrium is the number that is found to be lined up with itself in a row on the schedule (one in the "quantity demanded" column, one in the "quantity supplied" column), the price equilibrium is the final number aligned with those two, set under the "price" column 41. list the characteristics of money acceptability (most important) - scarcity - portability - durability - divisibility - uniformity 42. what are the different ways to invest your money? (include risk and reward for each one) FDIC Insured Savings and Government Bonds: The Safest Investment - Corporate Bonds: Moderate Risk but Higher Reward - Stocks: The Highest Rewards 43. how are prices determined?M market equilibrium (supply and demand) 44. what is perfect competition? What makes it a perfect competition? When the market is most competitive - More competition ensures prices are sold are market equilibrium - made by: many producers and consumers, identical products, easy entry into the market, no control over prices 45.c haracteristics of a monopoly - one producer - unique product - high barriers to entry - substantial control over prices 46. characteristics of an oligopoly - few producers - similar products - high barriers to entry some control overpricing 47 What are the different types of bank loans and what are they used for? - Consumer Loans: personal loan by an individual to buy a big item like a car or boat - Commercial Loans: loans taken out by a business - Mortgage Loans: loan used to buy a house 4 8. Define positive and negative externalizes positive externalities: a BENEFIT that falls on someone other than the consumer or producer negative externalities: a COST that falls on someone other than the consumer or producer 49. what is non-price competition? Whatt factors are included? non-price competition: using product differentiation and advertising to attract customers (shoe commercial) factors of non-price competition: - physical characteristics - service - location - status and image 50. define price leadership a dominant firm sets a price, and the other smaller firms follow suit 51.define collusion occurs when producers get together and make agreements on production levels and pricing - all at the same time so they all make money, instead of competition 52. define bank charter an agreement banks must have with the state they're in to operate 53 Define diversification is it important in investing? Diversification is investing in a variety of different ways. it is important because it helps with the risk of losing too much money because it's not all in one place 54. what is the role of prices for consumers? Whatt is the role of prices for suppliers? for consumers, the role of price is to let them know whether or not that is where they want to put their money for producers, the role of price is to let them know what is demanded 55. what is the most important role of prices? to convey information (both consumers and producers use this information to make decisions) 56. Know where in the constitution gives power to Congress to get involved in economics; The article of the constitution, property rights 57. Know what the government does to promote economic stability: Creating widely accepted currency, stimulating business activity(ease of starting business and tax rebates/incentives), and stimulus packages 58. Know how the government gets involved in externalities: Gov. intervenes to limit negative externality and encourages positive externalities with ease of starting a business. 59. Know who ends up paying the price when a business is taxed: Consumers 60. Know what taxes are the government’s largest source of revenue: Income tax 61. know what determines how much a corporation pays in taxes: Based on profits NOT REVENUE 62. Know what a yellow-dog contract is: employer made workers sign a contract prohibiting them from joining a union 63. know the amendment that allows for income tax:16th amendment 64. know which amendment protects a person of just compensation when the government uses eminent domain: The 5th amendment 65. know the agency that insures banks: FDIC Federal Deposit Insurance Corporation 66. know the main reason the labor force is growing: The main reason is that women are working more than ever before 67. know the purpose of income redistribution: Policy to shrink the gap between rich and poor 68. know what eminent domain i: The power to force the transfer of property to be taken for public use without just compensation 69. know where taxes go that people do and don’t agree with: Agree with national defense, infrastructure, and paid education. Disagree: Welfare programs, and redistribution of income 70. know what progressive, recessive, and proportional taxes are: Progressive: % of taxes a person pays increases as their income increases. Recessive: % of taxes paid decreases as income increases wealthy pay a small %). Proportional: a tax that takes the same share of income at all income levels. 71. Know that excise, luxury, and sales taxes are : Excise: a tax put on a good a gov. wants to regulate. Luxury: a tax on luxury goods. Sales tax: fixed tax on the price of a purchased good. 72. how much a person pays into social security is determined by whether they are employed (6.2% for workers and 6.2% for employers) or self-employed (12.4%). fixed-rate tax on income 73. know what privatization is: Turn something that was a common resource into a private resource 74. know which two agencies guarantee competition: the Justice Department and the Federal Trade Commission (FTC) 75. know what a tax base is: anything that can be taxed 76. How does GDP correlate to literacy rates: GDP is usually high when many people are working and contributing to the economy. The more educated people are, the better jobs they can get. 77. What does inflation do to purchasing power: Loss of purchasing power: the more expensive goods and services become the less consumers have complete freedom in what they purchase 78. Why do countries trade, even when they don’t have to: So they can have variety (consumers like that) and tove differential products 79. What is a protective tariff: A tax on imported goods 80. What classifies someone as unemployed: Members of the workforce who are jobless and who have been actively working for a job over the last 4 weeks 81. Know the 4 phases of a business cycle: Expansion, peak, contraction, and trough 82. What is depreciation: Depreciation in economics refers to the gradual decrease in the value of an asset over time due to wear, tear, or obsolescence. 83. Know how education is considered an export: Someone comes to a country and is educated. They take that education and apply it back to their home country. 84. What is Cyclical Unemployment: Unemployment due to economic decline 85. What causes economic booms and busts Bust: high interest rates, economic recession, and shortage of raw materials Boom: increase in business investments (leads to new workers, etc.), discovery of new resources, innovation in science and technology, and consumer confidence in the Economy 86. How does trade affect consumers and workers: Consumers: increased variety of goods, lower pieces because of competition Workers: jobs involved in world trade are always at risk of being lost due to outsourcing. 87. Know the correlations between trade agreements and trade barriers: Trade agreements reduce trade barriers 88. Know the different limitations on CPI and measuring inflation: The CPI has limitations like substitution bias, fixed baskets, quality changes, and excluding investment costs, which can make it less precise in fully capturing inflation. 89. What is the natural rate of unemployment: Between 4-6% 90. Who is the U.S.'s most important trade partner: Mexico (1st), Canada, and China 91. Know the correlation between trade surplus/deficit and the value of money Trade surplus makes a country’s currency more valuable since they’re bringing in more money than sending out, meaning their money remains less available to other countries. However, a trade deficit doesn’t always mean a struggling economy 92. What are the negative costs of unemployment? Loss in potential output, the risk for individuals (loss of possessions, health benefits, etc), and affects gov. (less income tax and gov. pays individuals instead of individuals helping the country)93. what is the percentage of creeping inflation 3.4% 94. What are the different services the U.S. exports Engineering, education, and informational services 95. What is a trade deficit When a country imports more than it exports