basic economics

• Barter refers to the direct trade of goods or services without the use of an intermediate medium of exchange
• Capital refers to any money and goods used to produce income
• Capitalism is an economic system in which goods are privately produced and owned
• Currency refers to a medium of exchange agreed on by a community
• Currency may not have any intrinsic value
• Goods in economics are tangible objects that satisfy people’s needs and wants
• Public goods are provided by the government and not owned by individuals
• Opportunity cost is what a person must give up when a particular alternative is chosen
• For example, studying for an exam instead of playing a video game
• A surplus is a supply of a good or service that exceeds the demand
• Economics is the study of how a society divides their resources among groups and people
• Resources in any society are limited
• Economic system is based on what goods are made, how they are made, and who benefits from them
• Macroeconomics looks at larger systems, while microeconomics looks at smaller systems
• Market economy is based on supply and demand
• Market equilibrium is where the needs of customers meet the needs of suppliers
• Elasticity refers to how supply/demand reacts to a price change
• Market efficiency is when a market can meet customer demand
• Comparative advantage in international trade means focusing on a certain product that can be made faster and cheaper
• Market structures in an output market include perfect competition, monopoly, monopolistic competition, and oligopoly
• Four types of monopolies are natural monopoly, geographic monopoly, technological monopoly, and government monopoly
• US government acts to control businesses include Sherman Antitrust Act, Clayton Antitrust Act, and Robinson-Patman Act
• Marketing includes all efforts to get customers to buy goods
• Utility refers to how well a good or service satisfies the need of a customer
• Four types of utility are form utility, place utility, time utility, and ownership utility
• Marketing plan factors include product, price, place, and promotion
• Distribution channels influence the route a product takes from producer to consumer
• Macroeconomics looks at economic trends and structures on a national level
• Variables studied in macroeconomics include output, consumption, investment, government spending, and net exports
• Gross Domestic Product (GDP) measures a nation’s economic output over a limited amount of time
• Two major ways to measure GDP are the expenditures approach and the income approach
• Two major ways to measure Gross Domestic Product (GDP) of a country:

  • Expenditures approach: calculates GDP based on money spent in each sector
  • Income approach: calculates GDP based on money earned in each sector
• Both methods give the same results and are based on four economic sectors: consumer, business, government, and foreign sectors
• Aggregate supply is the amount of national output, while aggregate demand is the amount of output purchased
• Economic phases:

  • Boom: GDP is high and the economy is well-off
  • Recession: GDP falls and unemployment rises
  • Trough: lowest point of recession
  • Recovery: unemployment lessens, prices rise, and the economy begins to recover
• Inflation occurs when demand exceeds supply, leading to artificially high prices
• Five forms of unemployment:

  • Frictional
  • Structural
  • Cyclical
  • Seasonal
  • Technological
• Three types of inflation:

  • Creeping inflation
  • Galloping inflation
  • Hyperinflation
• Government Fiscal Policy forms:

  • Monetary policy
  • Contractionary policies
  • Expansionary policies
• Money is used as an accounting unit, store of value, and form of exchange