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Economics deal primarily with the concept of how society manages is scarce resources. Therefore economics study how people make decisions: how much they work, what they buy, how much they save, and how they invest their savings, how people interact with one another. And analyze forces and trends that affect the economy as a whole, including the growth in average income, the fraction of the population that cannot find work, and the rate at which prices are rising. Equity describes the property of distribution economic prosperity family among the members of a society. When someone gives up something in order to obtain another item it is called opportunity cost. Yes, she should expand her operation because expanding her operation then leads to her making more tables then selling more tables and she can let her business grow and she can make a lot of money. Rational people systematically and purposefully do the best they can to achieve their objectives, given the opportunities they have. Rational people often make decisions by comparing marginal benefits and marginal costs. Market failure refers to a situation in which the market left on its own fails to allocate resources efficiently. An externality is the impact of one persons actions on the wellbeing of a bystander and an example is pollution Productivity is defined as the quantity of goods and services produced from each hour of a workers time. Inflation is an increase in the overall level of prices in the economy. Factors of production are labor, land and capital Circular-flow diagram represents two markets. One is the markets for goods and services, households are buyers, and firms are sellers. In particular, households buy the output of goods and services that firms produce. In the markets for the factors of production, households are sellers and firms are buyer. In these markets, households prodce the inputs that firms use to produce goods and services. An outcome is said to be efficient if the economy is getting all it can from the scarce resources it has available. Points on (rather than inside) the production possibilities frontier represent efficient levels of production. The production possibilities frontier shows the combinations of outputs-in this case cars and computers- that the economy can possibly produce.. the economy can produce any combination on or inside the frontier. Points outside the frontier are not feasible given the economys resources. A production possibilities frontier shifts outward when there is a technological advance because this advance expands societys set of opportunities. Trade can make everybody better off because it keeps it from one person producing every good, and so that you can specialize in something and trade that for other things that you need. For each good produced in a market economy, the interaction of demand and supply determines the equilibrium. A competitive market is a market in which there are many buyers and many sellers so that each has a negligible impact on the market price. A monopoly is exclusive control of a commodity or service in a particular market, or a control that makes possible the manipulation of prices. An example of complementary goods are like gasoline and automobiles, computers and software, and peanut butter and jelly. Substitutes are often pairs of goods that are used in place of each other, such as hot dogs and hamburgers, sweaters and sweatshirts, and movie tickets and video rentals. The law of demand claims that other things equal, the quantity demanded of a good falls when the price of the good rises. Any change that raises the quantity that buyers wish to purchase at a given price shifts the demand curve to the right. Any change that lowers the quantity that buyers wish to purchase at a given price shifts the demand curve to the left. An increase in demand is represented by the demand curve moving to the right. The law of supply states that other things equal, the quantity supplied of a good rises when the price of the good rises. Market supply depends on all those factors that influence the supply of individual sellers, such as the prices of inputs used to produce the good, the available technology, and expectations. In addition the supply in a market depends on the number of sellers. The movement from S to S is called the change in supply. The movement from S to S could be caused by the change in demand for the product. The point where the supply and demand curves intersect is called the equilibrium point. Equilibrium price balances quantity supplied and quantity demanded, and equilibrium quantity is the quantity supplied and demanded at equilibrium price. Price is the sum or amount of money bought, sold or offered to sell, and quantity is a particular or indefinite amount of anything. D B A&C

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There is a decrease in production because of the decrease in demand for beef. Elasticity is a measure of the responsiveness of quantity demanded or quantity supplied to one of its determinants. If demand is inelastic then the quantity demanded is unchanged. Holding all other forces constant, when the price of gasoline rises, the number of gallons of gasoline demanded would fall substantially over a ten-year period, because the price is too expensive and no one demands it. A price ceiling is a legal maximum on the price at which a good can be sold A legal minimum is called a price floor. A price ceiling is binding when the price that balances supply and demand is above the ceiling. Revenue from the Federal Insurance Contribution Act (FICA) is used to pay for social security and Medicare, the income support and healthcare programs for the elderly. A tax burden falls more heavily on the sellers side of the market. Consumer surplus is the amount a buyer is willing to pay for a good minus the amount the buyer had to pay for it. Producer surplus is the amount a seller is paid for a good minus the sellers cost of providing it. The price above P, below A and a higher quantity then point C. Below the price P, above point A, and below the quantity C. A tax on imported goods is called a tariff. Trade among nations is based on comparative advantage. It allows each nation to specialize in doing what it does best. The arguments for trade restrictions of the jobs argument, national security, and the unfair-competition argument are often advanced. The infant industry argument is the argument for temporary trade restrictions to help new industries get started.

51. The North American Free Trade Agreement is an agreement that removed most barriers to trade and investment among the United States, Canada, and Mexico 52. A patent confers upon the creator of an invention the sole right to make, use, and sell that invention for a set period of time. 53. An example of a natural monopoly would be gas, water, and electricity 54. A free rider is a person who consumes more than his/her fair share of public resource 55. Individual income tax has been the largest source of revenue for the federal government. 56. A budget deficit is an excess of expenditures over revenue. 57. When government receipts exceed total government spending during a fiscal year, the difference is a budget surplus. 58. As government debt increases taxes are raised 59. The benefits principle of taxation can be used to argue that wealthy citizens should pay higher taxes than poorer ones on the basis that rich people will have more benefits than a middleclass or poor person and will therefore get taxed more than a rich or poor person. 60. The argument that each person should pay taxes according to how well the individual can shoulder the burden is called Ability to Pay Principle. 61. The tax system that requires higher income taxpayers to have a lower tax rate is a regressive tax system. 62. The tax system that requires higher income taxpayers to pay a higher percentage of their income in taxes is a progressive tax system. 63. Profit is defined as the positive gain from an investment or business operation after subtracting all the expenses. 64. Economists normally assume that the goal of a firm is to maximize its total revenue, maximize its profit, and sell products at the highest price possible. 65. Average Total Cost Curve (Long run)

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At low output levels a firm experiences diseconomies of scale In a competitive market the actions of any single buyer or seller will have a negligible impact on the market place. The collection of statutes aimed at curbing monopoly power is called anti trust laws. The stated reason for resorting to regulation of a monopoly, rather than promoting competition through antitrust is that the industry in question is believed to be a profit maximizing monopoly. 70. The factors of production are best defined as the various resources, taken as a collective group, which contributes to the production of a product or service. 71. When the supply of workers is plentiful one would predict that market wages would be low, because there is a high supply of workers willing to work for low wages. 72. Economists who support minimum-wage legislation are likely to believe that it is a good way of helping the working poor without any cost to the government. 73. GDP is regarded as the best single measure of a societys economic well being. 74. A recession is a period during which the state of economy declines. 75. The consumer price index is used to measure consumer price inflation 76. A nation's standard of living is measured by its real GDP per person 77. Human capital is the economists term for the knowledge and skills that workers acquire through education, training, and experience. 78. When opening a restaurant you may need to buy ovens, freezers, tables, and cash registers. Economists call these expenditure capital investments. 79. Institutions in the economy that help to match one person's saving with another person's investment are collectively called the Financial Institution. 80. The prices of stock traded on exchanges are determined by the supply of and demand for the stock in these companies. 81. Stock indexes are an average of a group of stock prices. 82. Profits paid out to stockholders are dividends. 83. The natural rate of unemployment is the amount of unemployment that the economy normally experiences. 84. Cyclical unemployment refers to the year-to-year fluctuations in unemployment around its natural rate, and it is closely associated with the short-run ups and downs of economic activity. 85. Changes in the quantity of money affect inflation, interest rates, production, and employment. 86. Liquidity refers to the ease with which an asset can be converted into the economys medium of exchange. 87. Commodity money type of currency has intrinsic value. 88. M1 is a money stock. 89. The supply of money is determined by the Federal Reserve with the Banking system 90. The velocity of money is the rate at which money changes hands. 91. Foreign-produced goods and services that are sold domestically are called imports. 92. Net exports of a country are the value of a nations exports minus the value of its imports. 93. In the short run, an increase in the money supply causes interest rates to fall. 94. Federal Funds Rate is the interest rate that banks charge one another for short-term loans 95. The government buys a bridge. The owner of the company that builds the bridge pays her workers. The workers increase their spending. Firms that the workers buy goods from increase their output. This type of effect on spending illustrate the Multiplier effect 96. In the long run, the inflation rate depends primarily on growth in the money supply 97. A decrease in the natural rate of unemployment affect the long-run Phillips curve by making the long-run Phillips curve shift downward. 98. When there is an adverse supply shock an event directly alters firms costs and prices negatively, shifting the economys aggregate-supply curve and Phillips curve. 99. If the unemployment rate rises, Fiscal and monetary policies would be appropriate to reduce it. 100. The Federal Reserve will tend to tighten monetary policy during inflationary periods.