Economics Study Guide (2023/2024) 100% Correct

Economics Study Guide (2023/2024) 100% Correct Economics social science dealing with study of how people satisfy unlimited/ competing wants with careful use of scarce resources. Scarcity fundamental economic problem facing all societies that result from a combination of scarce resources and peoples unlimited wants. Opportunity Costs cost of next best alternative use of money, time, or resources when one choice is made rather than another. Trade off alternatives that must be given up when one is chosen rather than another. Factors of production productive resources that make up four categories of land, labor, capital, and entrepreneurship. Economic system organized way a society provides for the wants & needs for its people. Traditional economic system allocation of scarce resources & other economic activity is a result of ritual, habit, and custom. Command economic system characterized by the central authority that makes most of the major economic decisions. Communism economic and political system in which factors of production are collectively owned and directed by the state; theoretically classless society where everyone works collectively for the common good. Socialism economic system which government owns some factors of production and has a role in determining what and how goods are produced. Market economic system supply, demand, and price system help people make decisions and allocate resources, same as free enterprise economy. Fascism everything done in the name of nation, no individual willingness. Capitalism system where private citizens own and use factors of production to generate profits. Consumers Who plays an important role in a market economy? Profit motive driving force that encourages people and organizations to improve their material well being; characteristic of capitalism and free enterprise. Market meeting place or mechanism allowing buyers and sellers of an economic product to come together: either local, regional, national, and global. Perfect competition large number of well-informed independent buyers and sellers who exchange identical products. Demand curve graph showing the quantity demanded at each and every possible price in the market. Supply curve graphical representation of quantities produced at each and every possible price in the market. Quantity demanded quantity of the product purchased in response to price. Quantity supplied amount offered for sale at a given price; point on the supply curve. Law of Demand states that the quantity demanded of a good or service varies inversely with its price (price up demand down price down demand up) Law of Supply the principle that suppliers will normally offer more for sale at high prices and less at lower prices. What sets price the forces of supply and demand interact to determine price Shortage when the quantity demanded is greater than quantity supplied Surplus when the quantity supplied is greater than quantity demanded Change in demand a movement of the entire demand curve to the right/left Changes of demand non-price factors that influence the demand of a good/service Causes for increase in demand for a product Consumer income, consumer tastes, substitutes, complements, change in expectations, # of consumers Substitutes products that can be used in place of other products (ex: butter for margarine) Compliments Related goods-use of one increases the use of the other. (ex: spaghetti and tomato sauce) Change in supply A situation where suppliers offer different amounts of products for sale at all possible prices in the market. Causes for an increase of supply Cost of inputs, productivity, technology, taxes and subsidies, expectations, gov't regulations, # of sellers all increase. Elastic A small change in price causes a large change in quantity Elasticity of demand the extent to which a change in price causes a change in the quantity demanded. Characteristics of elasticity of demand Can the purchase be delayed? Are adequate substitutes available? Does the purchase use a large portion of income? (When demand=elastic, it stretches as price changes) Elasticity of supply a measure of the way in which quantity supplied responds to a change in price. Characteristics of elasticity of supply Time and availability of input substitutes Ceteris Peribus "All else equal" Graphing Supply and Demand Supply goes up from left to right, Demand goes down from left to right Price Floor Lowest legal price that can be paid for a good or service. Price ceiling A maximum legal price that can be charged for a product Equilibrium price the price that "clears the market" by leaving neither a surplus nor a shortage at the end of the trading period Economic Goals of the US economic freedom, economic efficiency, economic equity, economic security, full employment, price stability, economic growth, future goals GDP dollar value of all final goods, services, and structures produced within a country's national borders during a one year period