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| one of 4 world market types |
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| When buyer and seller come to exchange services |
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| Causes demand to shift on a demand schedule and supply on Supply schedule |
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| must always have a positive intercept |
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| essential to the market system |
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| Market economy characteristics |
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1. Use advanced technology
2. Specialization
3. Large amounts of capital |
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| Important for the efficient use of scarce resources. |
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essential in a market system/economy
Entrepreneurs will use least cost combination of resources |
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| federal governement budgetary process |
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| Making the most efficient use of scarce resources to satisfy as many needs and wants as possible |
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Risk taker
Unfulfilled needs/wants is viewed as profit opportunity |
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| Ability to produce a larger total output in the same period of time |
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| Driving force in capitalism |
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| Requires minimum government interference |
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| Earnings after taxes are divided into dividends and retained earnings |
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| Deals with Scarcity and choice |
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| Economic analysis of the individuals |
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Deals with Keynesian economics
Lumps the whole economy together |
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Abstracts
Represent ideal situations, not real world situations |
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| Conversion of resources into consumer products |
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Substitute goods
If one is more expensive, switch to the other. |
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| Production Possiblity Curve |
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Depicts the total output with no inputs
Limits of Efficiency
Obtainable and Efficient if it's there |
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| Leads to specialization -> Comparative Advantage -> Specialization achieved from division of labor. |
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| specialization achieved from division of labor |
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| Ability to produce a good or service at a lower opportunity cost compared to other producers. Geographical Advantage. |
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Not necesarily inferior in quiality, just not name brand item.
Second-Tier goods. |
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Keynesian Economics
Make valued judgements |
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Classical or Austian Economics
Don't make valued judgements |
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| Function of price on the market |
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1. Organizes market
2 Rations scarce goods
3. Steers resources into most profitable or efficient use. |
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ABOVE MARKET PRICE
Established by the government or with blessings
Leads to surplus. (Farm Subsidies) |
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BELOW MARKET PRICE
Leads to shortage
Established by government |
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| Essential to the market or price system |
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| Quanitity restrictions on imports |
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| Externalities - Spillovers |
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Mean the same thing
Cost of production is paid by third-party
Also benifits ( Public health ) |
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Not exclusionary
Fire Department/ Police
Can not exclude non payers |
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Exlusionary goods
Can exclude non payers (Golf courses) |
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| Service of shelf life of greater than 3 years |
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| Shelf life of less than 3 years |
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| Major problem for investors in a corporation |
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True owners of a firm
Recieve returns in form of divedens |
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Debt position
Loaned Money |
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| Payments made to stock holders |
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| Governments major source of income |
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| Secondary source of revenue |
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GDP - Netherlands
Volume - China
Value - USA |
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1. Canada
2. Western Europe
3. Japan
4. mexico |
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Monetary restriction of imported goods
Excise tax |
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tax in reverse
Payments made to a firm so they can remain competitive in the domestic and foreign business |
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| Major cause of depression in 1930 |
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| refers to labor, but there's only a demand for a resource for the final outcome of the resource. |
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| Full Employment Act, 1946 |
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Definition
Created four things:
Fiscal policy, monetary policy, JEC, CEA. |
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Makes the market work
Concept in which all exchange is based. |
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It goes up in value
Strong dollar buys more foreign exchange |
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Goes down in value
Buys less foreign exchange |
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Major problem with international trade
Value of two currencies change before trade takes place. |
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| inputs of production (factors of production) |
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| Land, Labor, Capital, Entrepunuership |
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| Next best alternative that must be given up in order to satisfy a need or want |
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| If the price of superior good goes up, switch to an alternative |
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| When Quantity supplied and quantity demanded are equal |
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Income goes up, tax goes up
Vice versa |
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| Main feature of price or market system |
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| Variable that moves first |
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| Variable that changes in value when another value changes |
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| Functional distribution of income |
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Payment of factors of production
wages/profits/rent/interest |
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| Most common business form in the country |
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| Overcomes some problems of sole proprietorship |
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| Most important business form in the country |
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| Investors in corporations have this |
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| Sole proprietorships have this |
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| The administrative function in a business |
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| Where the product is produced |
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| Federal government income source |
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| State Government income tax |
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| Transportation technology |
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| Main reason of rapid increase in international trade after WWII |
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Things to make things shift on demand other than price:
Preference/ Personal Taste/ Income |
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Thing that make supply shift:
Cost of factor of production |
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General Agreement on Tariffs and Trade
Replaced by WTO |
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Prices go up, demand goes down.
Vice Versa. |
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Price goes up, supply goes up.
Price goes down, supply goes down. |
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| Government transfer payments |
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Non exausted
Government not spending the money itself, just redistributing it. |
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| Expansion of money supply and extension of credit |
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| Government's role in the market |
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| Maintain a stable currency |
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| If they shift at the same time, Equilibrium can not be determined. |
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| Others take the burden of payment, but anyone can use it regardless of payers. |
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| Firm that produces a good or service which there is no close substitute. |
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