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factors of production
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resources used to make goods and services
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terms list

factors of production
resources used to make goods and services
resources used to make other goods and services
human capital
knowledge and skills people gain through education and experience
limited amounts of resources to meet unlimited desires or wants
opportunity cost
the most desirable alternative given up
production possibilities curve/frontier
shows alternative ways of using country's resources and the maximum amount that can be produced
an economy is using resources in a way to maximize production of goods and services
centrally planned / command economy
the government makes most of the economic decisions
means buyers and selers are focused on personal gain
the struggle among producers for dollars of consumers
factor market
firms purchase land, labor, and capital from households
product market
households purchase goods and services produced by firms
the total value of all final goods and services produced in a country
law of demand
the lower the price the more consumers will buy
two goods that are bought and used together
goods used in place of one another
elasticity of demand
describes how people respond to price changes
total revenue
the amount of money the company receives by selling its goods (or Price X Quantity)
law of supply
higher the price the larger quantity produced
fixed cost
costs that does not change no matter how much is produced (like rent)
variable cost
costs that changes depending on the quantity produced
the point at which quantity supplied and quantity demanded are equal
price ceiling
a maximum price that can be charged or paid for a good or service
price floor
a lowest price that can be paid or charged for a good or service
minimum wage
lowest hourly rate a business can pay workers
when the price is higher than equilibrium and supply is greater than demand
when price is lower than equilibrium and demand is greater than supply
perfect competition
many firms producing the same product with no barriers to entry
one single company producing a unique product with a complete barrier to entry
natural monopoly
a market that runs most efficiently if one firm provides all the output
monopolistic competition
many companies making similar products with few barriers to entry and some control over price
market dominated by a few large firms
a group of companies in an oligopoly that successfully collude to control prices
fiat money
this type of money has value because the government states that it is an acceptable means to pay debts
insures deposits if a bank fails
the amount borrowed
mutual funds
a way of investing that puts money into many different stocks and bonds
spreading out investments to reduce risk
Dow Jones Average
30 stocks that represent the market
period of economic growth
the height of economic expansion
falling GDP
the contraction of an economies lowest point
frictional unemployment
occurs when people are between jobs
Cyclical Unemployment
unemployment during recession or contraction
working at a job that is below your skills
total price of a market basket collection of goods and services that is used to measure inflation
demand-pull theory
theory that inflation occurs when demand for goods exceeds supply
quantity theory
inflation occurs when to much money is in supply
propotional tax
a tax that remains the same at all income levels (flat tax)
regressive tax
percentage of tax increases at lower income levels (sales tax)
progressive tax
percentage of tax increases as income increases (income tax)
fiscal policy
the governments use of taxing and spending to keep the nations economy stable
Expansionary policy
increased government spending or lowering taxes
contractionary policy
decreased government spedning or raising taxes
keynesian economics
government spending is the best way to encourage economic growth
supply side economics
lower taxes is the best way to encourage economic growth
Monetary Policy
the actions the Fed takes to incluence GDP and keep prices stable - controling the money supply
3 economic questions
What to produce, How to Produce it, and who will get what is produced
Mixed Economy
An economy that uses the market and the government for direction (the USA is an example - although it leans more toward a market economy)
New York Stock Exchange
The oldest and largest stock market in the USA
Trade Deficit
When a nations imports are more than its exports
When the value of a dollar decreases

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