| A | B |
|---|
| fixed costs | costs a business has even if it has no output |
| variable costs | costs that change when rate of production changes |
| total costs | fixed costs plus variable costs |
| marginal cost | the extra cost of producing one more unit of product |
| total revenue | number of units sold times average price per unit |
| marginal revenue | extra revenue created by selling one more unit of product |
| break-even point | when total revenue equals total costs |
| profit | when total revenue exceeds total costs |
| loss | when total revenue is less than total costs |
| maximum profit | when marginal cost equals marginal revenue |
| equilibrium price | the price when supply meets demand |
| surplus | when supply exceeds demand |
| shortage | when demand exceeds supply |
| product differentiation | the real or imagined differences between competing products |
| non-price competition | methods used to establish product differentiation |
| first condition of perfect competition | a large number of buyers and sellers |
| second condition of perfect competition | identical products |
| third condition of perfect competition | buyers and sellers act independently |
| fourth condition of perfect competition | well informed buyers and sellers |
| fifth condition of perfect competition | buyers and sellers free to enter or get out of business |
| monopolistic competition | perfect competition without identical products |
| oligopoly | a small number of sellers dominate the market |
| collusion | oligopolist agreement to set prices illegally |
| price fixing | when oligopolist charge a predetermined price |
| monopoly | only one seller of product |
| natural monopoly | single seller produces product a minimum cost to public |
| geographic monopoly | when a location cannot support two competing businesses |
| technological monopoly | exclusive right to sell a product due to patent or copyright |
| government monopoly | when the ruling body provides a product business cannot produce |
| benefit principle of taxation | all who use a service pay for it |
| ability to pay priciple of taxation | all who can, pay taxes |
| proportional tax | same tax rate is paid by all |
| progressive tax | the more you make, the more you pay in taxes |
| regressive tax | low income earners pay a higher percentage tax |
| deficit spending | collecting less revenue than you spend |
| federal debt | amount borrowed to pay the all of the federal deficits combined |
| federal deficit | the difference between what the federal government collects and spends in a single year |
| abbreviation for gross domestic product | GDP |
| gross domestic product | all final products produced in twelve months times their prices |
| abbreviation for gross national product | GNP |
| gross national product | GDP plus foreign payments to US businesses outside the USA minus payments in USA to foreign business owners |
| abbreviation for net national product | NNP |
| net national product | GNP minus depreciation |
| abbreviation for personal income | PI |
| personal income | gross individual income |
| abbreviation for disposable personal income | DI |
| disposable personal income | personal income minus taxes |
| unemployment rate | percentage of people who are not working |
| unemployment rate formula | number of employed divided by total work force |
| frictional unemployment | workers are between jobs |
| structural unemployment | fundamental change in economy reduces demand for workers |
| cyclical unemployment | changes in the business cycle produces loss of jobs |
| seasonal unemployment | loss of jobs from changes in the weather |
| technological unemployment | use of machines eliminate human skills |
| full employment | lowest possible unemployment rate |
| inflation rate | comparison of prices at the beginning and end of a set time |
| creeping inflation | inflation rate equals one to three percent per year |
| galloping inflation | inflation rate is 100 to 300 percent per year |
| hyperinflation | inflation rate is greater than 500 percent per year |
| demand pull inflation | effect of consumers buying more than economy can produce |
| cost push inflation | when input costs raise production costs |
| price index | method for measuring change in prices over time |
| abbreviation for consumer price index | CPI |
| consumer price index | measures the change in prices of consumer goods |
| producer price index | measures the change in prices received by domestic producers of goods |
| abbreviation for producer price index | PPI |
| GDP price deflator | measures the average prices of all goods over a set time |
| Real GDP | GDP adjusted for inflation |
| federal reserve system | governing body for banks operating in US |
| federal open market committee | governs the money supply in the US |
| reserve amount | the combined total of the portion of each bank deposit |
| capitalism | economic system where the means of production and distribution are privately owned |
| socialism | economic system where the means of production and distribution are owned by the government |
| communism | economic system where the means of production and distribution are owned by all the people together |
