| A | B |
|---|
| Firms | Economic units that demand productive resources from households and supply goods and services to households and government agencies. (i.e. Businesses) |
| Three Essential Questions of Economy | What goods and services should be produced? How should these goods and services be produced? Who consumes these goods and services? |
| Marginal Benefit | The additional gain from consuming or producing one more unit of a good or service; can be measured in dollars or satisfaction. |
| Marginal Cost | The increase in a producer's total cost when it increases its output by one unit. |
| Economic Systems | Market Economy, Command Economy, Traditional Economy, Mixed Economy |
| A main feature of a Mixed Economy | Existence of private property, These must be defined clearly in order to have any sale or exchange be possible. Also limited government involvement. |
| Private Property Rights | Theoretical and legal ownership of resources and how they can be used. These resources can be both tangible or intangible and can be owned by individuals, businesses, and governments. |
| Markets | Places, institutions or technological arrangements where or by means of which goods or services are exchanged. |
| Laissez faire | Policy or attitude of letting things take their own course, without interfering. Abstention by governments from interfering in the workings of the free market. |
| Capitalism | System based on the private ownership of the means of production and their operation for profit. |
| Profit | Is the financial gain from business activity minus expenses. |
| Consumer sovereignty | is the idea that it is consumers who influence production decisions. (Does not exist in Command Economy) |
| Market Economy | An economy that relies on a system of interdependent market prices to allocate goods, services, and productive resources and to coordinate the diverse plans of consumers and producers, all of them pursuing their own self-interest. |
| Command Economy | An economy in which most economic issues of production and distribution are resolved through central planning and control. |
| Traditional Economy | An economy that relies on customs, history, and time-honored beliefs. |
| Mixed Economy | A type of economy that benefits from the advantages of all three while suffering from few of the disadvantages. |
| Types of Command Economies | Socialism, Communism, and Authoritarian |
| Main characteristic of a Traditional Economy | Survival |
| Main characteristic of Command Economy | Provide for everyone |
| Main characteristic of Market Economy | Competition |
| Mixed Economy | Public and private sector are allocated their respective roles for the welfare of all sectors in the economy. |
| Competition | Attempts by two or more individuals or organizations to acquire the same goods, services, or productive and financial resources. |
| Producers | People and firms that use resources to make goods and services. |
| Benefit | Monetary or non-monetary gain received because of an action taken or a decision made. |
| Price | The amount of money that people pay when they buy a good or service; the amount they receive when they sell a good or service. |
| Product | Something manufactured or refined for sale. |
| Market Structure | The degree of competition in a market, ranging from many buyers and sellers to few or even single buyers or sellers. |
| 4 Types of Market Structures | Perfect Competition, Monopolistic Competition, Oligopoly, Monopoly |
| Perfect Competition | A market structure in which a large number of relatively small firms produce and sell identical products and in which there are no significant barriers to entry into or exit from the industry. |
| Monopolistic Competition | A market structure in which slightly differentiated products are sold by a large number of relatively small producers, and in which the barriers to new firms entering the market are low. |
| Oligopoly | A market structure in which a few, relatively large firms account for all or most of the production or sales of a good or service in a particular market, and where barriers to new firms entering the market are very high. |
| Monopoly | A market structure in which there is a single supplier of a good or service. |
| Supply | A relationship between price and the quantity of a good or service that firms are willing to produce. |
| A fall in the price of key inputs | Causes supply to increase |
| A rise in the price of key inputs | Causes it to decrease |
| Improved production technology that reduces the cost of production | Causes the supply curve to increase |
| Quantity supplied | A specific amount at a particular price |
| On a graph an increase in supply is illustrated by | A shift to the right |
| On a graph a decrease in supply is illustrated by a | A shift to the left |
| Price Ceiling | A legally established maximum price that may be charged for a good or service. |
| Price Floor | A legally established minimum price that may be charged for a good or service. |
| Quantity Demanded | The amount of a good or service people will buy at a given price in a given period of time. |
| Quantity Supplied | The amount of a good or service sellers are willing and able to offer at a given price in a given period of time. |
| Shortage | The situation that results when the quantity demanded for a product exceeds the quantity supplied. Generally happens because the price of the product is below the market equilibrium price. |
| Surplus | The situation that results when the quantity supplied of a product exceeds the quantity demanded. Generally happens because the price of the product is above the market equilibrium price. |
| Rent-control laws that limit the rent that can be charged (or limit the increase in rents from year to year) are examples of. | Price ceiling |
| Farm products and the minimum wages are examples of | Price floors |
