Flashcards
AP Micro Chapter 2 and 3 Test
Flashcards do conjunto (84)
- 1Economic SystemA particular set of institutional arrangements and a coordinating mechanism for solving the economizing problem
- 2What the economic system determine in a society?What are that goods produced
How will they be produced
Who gets them
How to accommodate change
How to promote technological progress - 3What does the economic system differ in?Who owns the factor of production
Method used to motivate, coordinate, and direct economic activity - 4Laissez-Faire CapitalismGovernment intervention is at a very minimum
Markets and Prices are allowed to direct nearly economic activity - 5Command SystemGovernments have total control over all economic activity
Socialism or communism
Central planning makes all major decision concerning resources, composition, distribution of output, organization of production - 6Market SystemsIndividuals own most economic resources
Markets and prices serve as dominant coordinating mechanism used to allocate resources
Capitalism or mixed economy
Competition among buyers and sellers; act from self interest - 7Private PropertyThe right of people and firms to obtain own,control,employ,dispose of, and bequeath land, capital, and other property
Ensures mutually agreeable economic transitions take place
Encourage investment,innovation,exchange, maintenance of property and economic growth - 8Freedom of EnterpriseThe freedom of firms to obtain economic resources, to use or produce products of the firm's own choosing, and to sell their products in markets of their choice
- 9Freedom of ChoiceThe freedom of owners of property resources to employ or dispose of them as they see fit, of workers to enter any line of work only if qualified, and of consumers to spend their income in a appropriate manner
- 10Self-interestEach firm, property owner, worker, and consumer believes is best for itself and seeks to obtain
- 11CompetitionThe effort and striving between two or more independent revivals to secure the business of one or more third parties by offering the best possible terms
Implies producers can enter or leave industry - 12MarketAny institution or mechanism that brings together buyers (demanders) and sellers (suppliers) of a particular good or service
Decisions determine set of product and resource prices - 13How do market systems affect technology?Encourages extensive use and rapid development of complex capital goods
- 14SpecializationThe use of the resources of an individual, a firm, a region , or a nation to concentrate production on one or a small number of goods and services
- 15Division of LaborThe separation of the work required to produce a product into a number of different tasks that are performed by different workers
Specialization of workers - 16What are the benefits of specialization in division of labor?Specialization makes use of differences in ability
Fosters learning my doing
Saves time - 17MoneyAny item that is generally accepted to sellers in exchange for goods and services
Medium of exchange
Specialization requires exchange; occurs through barter - 18BarterThe direct exchange of one good and service for another
- 19What goods and services will be produced?Goods and services that can be produced at continuing profit
Continuing profit results when (TR>TC)
Continuing loss results when (TC>TR) - 20Consumer SovereigntyThe determination by consumers of the types and quantities of goods and services that will be produced with the scarce resources of economy
- 21Dollar VotesThe "votes" that consumers cast for the production of preferred products when they purchase those products rather than the alternatives available
Determines products surviving and failing - 22How will goods and services be produced?Goods and services will be produced in combinations that minimize cost per unit of output
Efforts intensified if firm faces competition
Least-cost production means firm must employ effective technique based on availability of tech and prices of needed resources - 23Who will get outputs of trade?Consumers with ability and willingness to pay existing market price
Depends of amount of income consumer had - 24How will system accommodate change?Changes in prices and profits communicates changes and elicits appropriate responses from businesses and resources suppliers
Direct expansion of same industries and combinations - 25How will systems promote progress?Technological Advances
Production or Distribution Costs
(Creative Destruction)
Capital Accumulation - 26Invisible HandSociety's goal will be met when individual seek own self-interest
Insures when firms maximize their profits and resource suppliers maximize income, group also helps maximize society's output and income - 27The Coordination ProblemCentral planners had to coordinate individual decisions by consumers, resources suppliers, and businesses
Failure of any single industry to achieve its output target cause chain - 28The Incentive ProblemCentral planners determined output mix; when misjudged, shortages and surpluses arise
- 29Circular Flow DiagramAn illustration showing the flow of resources from households to firms and of products from firms to households
- 30HouseholdsEconomic entities that provide resources to the economy and use the income received to purchase goods and services that satisfy economic wants
- 31What are some disadvantages of communism?No incentive to work harder
No incentive to innovate or come up with good ideas
No competition of improved quality of goods - 32Mixed EconomicsMix of decentralized decision making with government control
Direct economic activity
Private property
Freedom of enterprise
Freedom of choice
Self-interest
Competition - 33BussinessesEconomic entities that purchase resources and provide goods and services to the economy
Sole proprietorship
Partnership
Corporation - 34Sole proprietorship businessAn unincorporated firm owned and operated by one person
- 35Partnership BussinessAn unincorporated firm owned and operated by two or more people
- 36Corporation BusinessA legal entity chartered by a state or the federal government that is distinct and separate from the individuals who own it
- 37Product MarketA market in which products are sold by firms and brought by households
- 38Resource MarketA market in which households sell and firms by resources or the services or resources
- 39How will entrepreneurs gain or suffer from risk?They gain profits if they choose wisely
Suffer losses if they choose poorly - 40How are employees and supplies shielded from business risk?They are legally entitled to receive contracted wages and payments on time and in full
- 41Residual claimentIn a market system, the economic agent who receives whatever profit or loss remains at a firm after all other providers have been paid
- 42InsurancePromotes economic growth and investment by transferring risk from those who have a low tolerance for risk to those who have a high tolerance for risk
- 43What are the benefits of restricting business risk to owners?Elimates possibility that resource arrangements will be random; each owner chooses path that ensures MB is greater than or equal to MC
- 44ProfitCalculated by total revenue - total cost
- 45Private SectorRan by individuals and bussinesses
- 46Public SectorControlled by the government
- 47Factor PaymentsPayments for factors of production, rent, wages, interest, and profit
- 48Transfer PaymentsGovernments redistributes income
- 49SubsidiesGovernment payments to businesses
- 50MarketInteraction between buyers and sellers
Located local, national, international
Prices discovered by interaction of buyers and sellers - 51DemandDifferent quantities of goods that consumers are willing and able to buy at different prices
- 52Demand ScheduleA table of numbers showing the amounts of a good or services buyers are willing an able to purchase at various prices over a specified period of time
- 53Law of DemandInverse relationship between price and quantity demand
- 54Why does the Law of Demand occur?Substitution Effect
Income Effect
Law of Diminishing Marginal Utility - 55Substitution EffectIf the price goes up for a product, consumers buy less of that product and more of another substitute product
- 56Income EffectIf the price goes down for a product, the purchasing power increases for consumers allowing them to purchase more
- 57The Demand CurveA curve that illustrates the demand for a product by showing how each possible price is associated with a specific quantity demanded
- 58Market DemandBy adding quantities demanded by consumers at each possible price, we go from individual to market demand
- 59Determinants of DemandFactors other than price that determine the quantities demanded of a good or service
Demand curve shifts left or right
Demand shifters - 60What are the 5 shifters of demand?Taste and Preferences
Number of Consumers
Price of related goods
Income
Future expectations
NEVER PRICE - 61What are some examples of price of related goods?Substitute Goods
Complementary Goods - 62Substitute GoodsProducts or services that can be used in place of each other
Direct relationship between price and demand
Increase in one leads to decrease in another - 63Complementary GoodsProducts that are used together
Inverse relationship
Increase in price of a complement leads to decrease in demand of another - 64Change in DemandMovement of an entire demand curve or schedule such that the quantity demanded changes at every particular price
Caused by determinants of demand - 65Change in the Quantity DemandedAlong a fixed demand curve as a result of a change in the price of a product
- 66Law of Diminishing Marginal UtilityThe more you consume, the additional satisfaction received decreases
- 67SupplyDifferent quantities of a good that sellers are willing and able to sell at different prices
- 68Law of SupplyDirect relationship between price and quantity supplied
- 69Supply ScheduleA table of numbers showing the amounts of a good or service producers are willing and able to make available for sale at each of the possible prices during a specified period of time
- 70Supply CurveIllustrates supply for a product by showing how each possible price is associated with a specified quantity supplied
- 71Determinants of SupplyFactors other than price that determine quantities supplied of a good or service
Shifts curve left or right - 72What are determinants of supply?Resource Prices
Technology
Taxes and Subsidies
Price of other goods
Producer expectations
Number of sellers - 73Change in SupplyMovement of an entire supply curve or schedule such that quantity supplied changes at every particular point
- 74Change in the Quantity SuppliedChanges in quantity supplied along a fixed supply as an result of change in product's price
- 75Change in the Quantity SuppliedChange in quantity supplied along a fixed supply as an result of change in product's price
- 76Rationing Functions of PricesAbility of competitive forces of supply and demand to establish a price at which selling and buying decisions are consistent
Market Clearing Price = no surplus and shortage
QD = QS - 77Allocation EfficiencyThe amount that people desire
Firm producing combination of goods to meet society's needs
MB=MC - 78Productive EfficiencyFirm producing goods in least costly way to maximize profit
- 79SupplyProducers lower prices
( QS > QD) - 80ShortageProducers raise prices
( QS < QD) - 81Double ShiftPrice or Demand have to be indeterminate
- 82Price CellingA legally established maximum price for good or service
Below equilibrium price
Rationing problem
Black markets - 83Price FloorA legally established minimum price for a good or service
Above equilibrium price
Chronic surpluses - 84Rent ControlBelow equilibrium rent attack larger # of renters
Price control makes it less attractive for landlords to offer housing on rental market
Distorts market signals and misallocated
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- FlashCards sobre AP Micro Chapter 2 and 3 Test, criado por Amar Malik em 08-10-2019.
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- Amar Malik
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