Business Cycle Vocabulary

Peak: Highest point of real GDP. Greatest amount of spending and lowest amount of unemployment. In this phase, inflation becomes a problem.

Expansion: Recovery stage. Real GDP is increasing due to an increase in spending and decrease in unemployment.

Contraction/Recession: Real GDP  declines for 6 months due to a reduction in spending and increase in unemployment .

Trough: Lowest point of real GDP. Least amount of spending and highest unemployment.

Formulas

TFC+TVC=TC

AFC+AVC=ATC

TFC/Q=AFC

TVC/Q=AVC

TC/Q=ATC

AFC.Q=TFC

AVC.Q=TVC

P.Q=TR

Elasticity of Demand

Elasticity of Demand: a measure of how consumers react to a change in price.

Elastic Demand: demand that is very sensitive to s change in price. (e>1)
                         - Products not a necessity
                         - There are available substitutes

Inelastic Demand: demand that is not very sensitive to a change in price. (e<1)
                         - Product is a necessity
                         - There are few or no substitutions
                         - People will buy no matter what

                                                  Price Elasticity of Demand

Step 1: Quantity = new quantity-old quantity/old quantity

Step 2: Price = new price-old price/old price

Step 3: PED = % change in quantity demanded/ % change in price demanded

Vocabulary

Trade- Offs: Alternatives that we when we choose one course of action over another.

Opportunity Cost: Next best alternative.

Production Possibility Graph (PPG): Shows alternative ways to use an economics resources.

Total Revenue: the total amount of money a firm receives from selling goods and service.

Variable Cost: a cost that raises or falls depending on how much is produced.

Fixed Cost: a cost that doesn't change no matter how much is produced.

Marginal Cost: the cost of producing one more unit of a good.

Unit 1

                                         Macroeconomics vs. Microeconomics

Macroeconomics: The study of the economy as a whole.
                            - Inflation
                            - International Trade
                            - Wages

Microeconomics: The study of individual or specific units of the economy.
                            - Supply and Demand
                            - Market Structure
                            - Business Organization

                                      Positive Economics vs. Normative Economics

Positive Economics: Attempt to describe the world as is. Very descriptive. Thrives on the what-ifs.
                                - Collects present facts.

Normative Economics: Attempt to prescribe how the world should be.
                                - Opinion based

                                                                 Needs vs. Wants

Needs: Basic requirement for survival.
          - Includes food, water, shelter and clothing.

Wants: Desire of citizens

                                                                Goods vs. Services

Goods: Tangible goods
           - Capital Goods: Items used in the creation of other goods.
           - Consumer Goods: Goods intended for final use by the consumer.

Services: Work that is performed for someone.

                                                             Scarcity vs. Shortage

Scarcity: Most fundamental economic problem that all societies face. It is hoe to satisfy unlimited wants with limited resources.

Shortage: Where quantity demanded is greater than quantity supplies

                                                         4 Factors of Production

- Land: Natural Resources
- Labor: Work force
- Capital: Human resources, physical resources
- Entrepreneurship: Innovative, risk takers