Economics & Personal Finance

Absolute advantage - ANSWERS-When someone can produce a certain good with fewer resources, that person has an absolute advantage over a trading partner. Adam Smith - ANSWERS-father of modern economics; free-market economy administrative law - ANSWERS-regulations Asymmetric information - ANSWERS-occurs when someone in the market knows more than others in the market average cost - ANSWERS-the average amount of money spent on producing each unit of the product Average product (labor productivity) - ANSWERS-total product divided by the number of laborers average revenue - ANSWERS-the average amount of money that is gained from selling each unit of a product. This is calculated as the ratio of total revenue to the number of units sold bar graph - ANSWERS-features rectangles proportional to the values they represent bonds - ANSWERS-written and signed promises to pay a certain amount of money on a specific date, or upon fulfilling a certain condition. issued by governments, companies, banks, public utilities and other large entities. budget constraint - ANSWERS-a set of product bundles that a consumer can purchase with a limited budget c corporation - ANSWERS-regular corporation Capital demand - ANSWERS-the demand for physical capital; depends on the unit cost of capital capital gain - ANSWERS-When you purchase and then sell something (including stocks) at a profit capital resources - ANSWERS-equipment, machines, tools, infrastructure Code of Federal Regulations (CFR) - ANSWERS-compilation of federal regulations collusion - ANSWERS-when producers agree on a fixed price on their products so all businesses end up making a profit command economy - ANSWERS-he government makes all or most of the economic decisions. These governments say their choices are not driven by self-interest but are oriented toward improving the well-being of their citizens commodities - ANSWERS-basic goods that satisfy customer wants comparative advantage - ANSWERS-An individual, business, or country that can produce a certain good at a lower opportunity cost than its trading partners has a comparative advantage complementary goods - ANSWERS-goods that go together conglomerate mergers - ANSWERS-when the businesses have little in common. consumer market - ANSWERS-households purchasing and selling goods and services for their own use consumer surplus - ANSWERS-the difference between a buyer's willingness to pay and the market price consumer's optimal choice - ANSWERS-combination of a budget constraint and consumer preferences that maximizes customer satisfaction within their own budget constraints cooperative (co-op) - ANSWERS-an organization owned and operated by people who use its services; they are designated as members, or user-owners. corporation - ANSWERS-limited liability in terms of personal assets, continuity of life, centralization of management, and the ability to transfer ownership interests. large, large flow of cash, many employees, complex cost-benefit analysis - ANSWERS-an economic examination that estimates what the cost of a project is and what the expected benefits are decrease in demand (D) with constant supply (S) --> (equilibrium price + quantity) - ANSWERS-both equilibrium price and quantity decrease decrease in price = - ANSWERS-higher demand decrease in supply (S) with constant demand (D) --> (equilibrium price + quantity) - ANSWERS-increase the equilibrium price (P) and decrease the equilibrium quantity (Q) demand - ANSWERS-the willingness and ability to buy specific quantities of a good or service demand for a good is highly elastic = - ANSWERS-consumers of the good will demand much more of the good as the price decreases and much less of the good as the price increases Demand inelasticity - ANSWERS-consumers are not very responsive to price changes Dependency Theory - ANSWERS-a country's economy is directly impacted by the development and expansion of another country's economy derived demand - ANSWERS-demand for one thing based on the demand for another determinants - ANSWERS-factors that determine supply and demand Determinants of demand - ANSWERS-- income - tastes and preferences - substitutes and compliments - Consumer Expectations - number of buyers determinants of elasticity of demand - ANSWERS-- the availability of one or more substitute goods - necessity or luxury good (the more a good is thought to be an absolute necessity the less the demand will be affected due to any price change) - time (a longer time frame allows consumers to adjust their behavior) - portion of income - payer determinants of elasticity of supply - ANSWERS-- Excess Capacity (if a business has excess production capacity (such as equipment not in use, a shift not scheduled, or extra raw materials on hand), the business is most likely able to increase its production without increasing its costs, which allows it to react to a change in price and demand) - Factor Substitution (the ability of a firm to interchange production resources - labor, land, and capital - affects its elasticity to react to price and demand changes) - Length of Production Process (the longer it takes for a firm to produce its products or to ramp up for increased production, the less elastic it is in meeting changes in demand and price) determinants of supply - ANSWERS-- resource prices (increase in production cost --> less willing to supply the market --> less production) - conditions of production (most willing to produce if conditions of production are good -- efficiency) - price of related goods (substitute and complimentary goods) - producers' expectations - number of suppliers direct costs - ANSWERS-can be linked directly to a product or service, such as the raw materials or labor required to produce the product or service. Direct materials and direct labor are the most common direct costs. economic model - ANSWERS-a simplified representation, such as a graph, of an economic environment economic profit - ANSWERS-lso includes opportunity costs as a part of the total costs when calculating profit Economics - ANSWERS-the study of how individuals and societies make choices under the condition of scarcity elasticity - ANSWERS-how much buyers and sellers change demand when price changes. It is equal to the percentage change in quantity divided by the percentage change in price. Graphically, a good has a higher elasticity of demand or supply if its demand or supply curve is flatter than another good elasticity < 1 - ANSWERS-inelastic