question
Product Market
answer
Households are BUYERS; Businesses are SELLERS in this market
question
Factor Market/Resource Market
answer
Households are SELLERS; Businesses are BUYERS in this market
question
Household/Individual
answer
Person or group of people who share income
question
Business/Firm
answer
An organization that uses resources in order to produce goods and services
question
What do households "sell" to businesses?
answer
Land, Labor, Capital, Entrepreneurial Ability (Factors of Production)
question
What helps the circular flow move?
answer
Money
question
Functions of Money
answer
Medium of Exchange; Standard of Value; Store of Value
question
What items are exchanged in the Circular Flow?
answer
Money and Goods/Services; Money and Factors of Production
question
Circular Flow of Economic Activity
answer
Diagram representing the flow or movement of goods and money in an economy
question
Sole Proprietorship
answer
One owner/operator; unlimited liability; limited life; easy to open/close; not taxed separately
question
Partnership
answer
Two or more owners/operators; unlimited liability; limited life; easy to open/close; benefits from specialization
question
Corporation
answer
Owned by shareholders; limited liability; unlimited life; taxed separately; difficult to start; raise money through stocks/bonds
question
Board of Directors
answer
In a corporation, Elected by shareholders; hires the CEO
question
Shareholders/Stockholders
answer
Buys stocks in a company; typically has voting rights
question
CEO (Chief Executive Officer)
answer
Hired by Board of Directors; makes the day-to-day decisions in a corporation
question
Pure/Perfect Competition
answer
Many sellers; identical (homogeneous) products; no single firm can control the price; Price takers; No barriers to entry
question
Monopolistic Competition
answer
Many sellers ; products are not identical; product differentiation ; brand loyalty; Advertising
question
Oligopoly
answer
A few large firms; Definite barriers to entry; products are similar or different; Cartels/collusion
question
Monopoly
answer
A single firm controls a given market; Price Maker; No competition (lots of barriers to entry)
question
Natural Monopoly
answer
Market situations where the consumer is better served by a well-regulated monopoly
question
Example of a Natural Monopoly
answer
power companies, gas companies, water companies, internet providers (producers of natural resources/utilities)
question
Collusion
answer
(verb) When sellers cooperate with competitors in an industry in order to raise their combined profits (it's illegal)
question
Cartel
answer
(noun) When competing producers form an agreement to work together in order to control supply and affect market prices.
question
Product Differentiation
answer
When firms attempt to compete on product features rather than selling price; products are similar but different enough to win brand loyalty
question
Unlimited Liability
answer
unlimited responsibility
question
Limited Liability
answer
Limited responsibility in your business
question
Limited Life
answer
Your business will most likely have a short lifespan
question
Unlimited Life
answer
Business can continue on forever
question
The Law of Demand
answer
As price increases, quantity demanded decreases. When price decreases, quantity demand increases. (inverse relationship)
question
Demand Schedule
answer
A table showing how much of a good or service consumers are willing and able to buy at different prices
question
Demand Curve
answer
A graphical representation of the demand schedule, showing the relationship between quantity demanded and price (slopes downward)
question
Quantity Demanded
answer
The actual amount of a good or service consumers are willing and able to buy at a specific price; changes are shown by movement along a demand curve
question
Change in Demand
answer
A change in a consumer's willingness and ability to buy a good or service at any given price; shown by a shift in the demand curve (right if demand rises, left if it falls)
question
Substitute Goods
answer
Goods used in place of one another; Price and Quantity Demanded move in the same direction
question
Complementary Goods
answer
Goods made to be used together as one; Price and Quantity Demanded move in opposite directions
question
Examples of substitute goods
answer
Coke vs. Pepsi, Butter vs. Margarine, Chicken vs. Beef
question
Examples of complementary goods
answer
Peanut Butter & Jelly, iPhone & iPhone charger, Playstation & games
question
Acronym for Determinants of Demand
answer
TRIBE
question
T in Tribe
answer
Consumer Tastes (news reports, seasons, holidays)
question
R in TRIBE
answer
Price of Related Goods (Substitutes and Complements)
question
I in TRIBE
answer
Consumer Income (promotion, fired)
question
B in TRIBE
answer
Number of Buyers (change in population)
question
E in TRIBE
answer
Consumer Expectations (future events)
question
How will a change in QUANTITY DEMANDED/QUANTITY SUPPLIED affect the curve?
answer
Moves a POINT along the curve
question
How will a change in DEMAND/SUPPLY affect the curve?
answer
SHIFTS the entire curve to the right (increasing) or left (decreasing)
question
Law of Supply
answer
Producers supply a greater quantity at higher prices than at lower prices (price and quantity are directly related)
question
Quantity Supplied
answer
The actual amount of a good or service producers are willing to sell at a specific price
question
Supply Schedule
answer
A table listing how much of a good or service producers are willing to supply at different prices
question
Supply Curve
answer
A graphical representation of the supply schedule; showing the relationship between price and quantity supplied as a positive slope
question
Change in Supply
answer
A change in a producer's willingness to sell at any given price; shown by a shift in the supply curve (right if supply rise, left if it falls)
question
Subsidy
answer
Government payment to a firm that lowers production costs so that the business can increase competition in the market
question
Regulation
answer
Government actions or policies that shape how businesses and consumers can interact
question
Deregulation
answer
Loosening of government rules that apply to economic/business activity
question
Acronym for the Determinants of Supply
answer
ROTTEN
question
R in ROTTEN
answer
Cost of resources (inputs)
question
T in ROTTEN (both Ts)
answer
Technology/Weather AND Taxes, Subsidies, Government Regulation
question
E in ROTTEN
answer
Producer Expectation
question
N in ROTTEN
answer
Number of Producers
question
Supply Shock
answer
Sudden restrictions in supply caused by natural disasters or human error that cause high prices and shortages
question
Examples of Government Regulation
answer
Gov't forces factories to provide safety goggles, FDA only allows the snack shack to be open 3 days a week (and not during lunch), Workers must get paid a minimum wage of $7.25/hour
question
Examples of Supply Shock
answer
earthquake, tornado, flood, drought, hurricane, forest fire, oil spill
question
Resource Costs
answer
The cost a firm must pay to acquire the resources it needs to produce its products
question
Where is Equilibrium found on the Supply/Demand Graph?
answer
Where the supply curve and demand curve intersect
question
Equilibrium
answer
Where Quantity Demanded (QD) = Quantity Supplied (QS)
question
Disequilibrium
answer
An imbalance in the market that results in SURPLUS or SHORTAGE
question
Shortage
answer
When QD (Quantity Demanded)> QS (Quantity Supplied)
question
What will happen to PRICE when there is a shortage?
answer
The market will put pressure on the price to RISE (due to scarcity)
question
Surplus
answer
When QS (Quantity Supplied) > QD (Quantity Demanded)
question
What will happen to PRICE when there is a surplus?
answer
The market will put pressure on the price to FALL
question
What is the difference between disequilibrium and price controls?
answer
Disequilibrium happens naturally while price controls are intentionally put in place by the government
question
Price ceiling
answer
Government sets a permanent price BELOW the equilibrium price. This is the HIGHEST price a producer can charge. Causes shortages.
question
Examples of price ceilings
answer
Rent Control
question
What is often the result of rent control laws?
answer
Shortages in housing; landlords (producers) don't make enough money to fix things when they break which can lead to unsafe living conditions for lower income earners
question
Price Floor
answer
Government sets a permanent HIGH price for goods/services ABOVE the equilibrium price. This is the LOWEST price a producer can charge. Causes surpluses.
question
Examples of Price Floors
answer
Minimum Wage
question
What is often the result of minimum wage laws?
answer
Due to higher wages, more people want these jobs (surplus of labor) but producers cannot afford to hire as many workers due to high costs of resources.
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
