World Class Education

Transcription

1 World Class Education

2 By Paul Suozzo Assistant Professor of Bus. Studies Ocean County College

3 1. Introduction 2. Markets 3. Consumer Theory 4. Costs of Production 5. Competition 6. Monopoly 7. Game Theory 8. Inflation 9. Economic Accounting 10. Business Cycle & Unemployment 11. Income & Expenditure 12. Fiscal & Monetary Policy 13. Taxation 14. Trade 15. The Future & Growth

4 Fertilizer Tomatoes Avg. per Bag Marg. Prod. / /

5 A B C D E Shovels Beach Chairs

6 Opportunity Cost: the forfeited benefit of the next best activity Marginal Analysis: making decisions considering only what can be changed Ceteris Paribus: while all other factors proceed as usual Factors of Production: Land, Labor, Capital & Entrepreneurship Law of Increasing Opp. Costs: extra units are only available at an increasing cost Cost/Benefit Analysis: to be worthwhile, an effort s benefits must outweigh its costs Command Econ.: a system where government makes most production decisions and owns most means of production (communism, socialism) Market Econ.: a system guided by markets where most means of production are owned privately (capitalism) Scarcity: when wants outnumber resources (opposite of abundance)

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9 Supply: a group of organizations providing a good or service for a fee Quantity Supplied: a particular quantity of a good or service made available by a specific price Supply Determinants: factors causing Supply to grow or shrink (counterparts for above three exist for Demand) Shortage: when a lower than equilibrium price causes Quantity demanded to surpass Quantity supplied (caused by P ceiling) Surplus: when a higher than equilibrium price causes Quantity supplied to surpass Quantity demanded (caused by P floor) Equilibrium: when there is no pressure for change, the P/Q combination that equate Qs to Qd Consumer Surplus: extra money consumers are willing to pay for a good Producer Surplus: extra discounts suppliers are willing to concede to sell a good Deadweight Loss: loss of surplus caused by market interference

10 Coefficient of Elasticity: change in Qd relative to a corresponding P change Normal Good: a good whose demand increases with income Inferior Good: a good whose demand decreases with income

11 Item Price Hot dog $ soda

12 Welfare: a person s level of physical comfort Utils: unit in which personal satisfaction is measured Indifferent: when a consumer has no preference between two options totals represent one s preferences while trade-off s must always reflect prices Utility Maximization Rule: the last unit from each category brings the same utils per dollar or else a more satisfying combination exists

13 FC=240 TC MC VC ATC AVC AFC

14 Stage Output Input Prdtvty

15 Profit: proceeds remaining once all costs (both direct & indirect) are deducted Fixed Costs: costs that remain constant despite level of production Variable Costs: costs varying directly with production Efficiency:being able to complete the same task with less resources Marginal Cost: cost brought about by another unit of production Long Run: frame of time in which all resources can be modified Scale Economies: change in efficiency brought about by changing scale of production Productivity: output/input

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17 Short-run: frame of time where at least one factor of production cannot be varied Shut-down: when a firm opts to make no output and incur a loss equal to fixed costs Q*: output quantity that maximizes profit or minimizes loss Price taker: when a firm has no influence over price Pure Competition: a market where many firms produce a standard product at the same price Invisible Hand: Adam Smith s metaphor for market allocation

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19 Market Power: ability to influence price Monopoly: when a market is supplied by a single firm Allocative Efficiency: pursuing a goal until marginal benefit (P) falls to equal marginal cost Productive Efficiency: minimizing per unit cost via mass production Fair Return: producing until costs = revenues P Discrimination: offering customers same or similar product for different prices based on willingness to pay Natural Monopoly: where cost per unit can only be minimized if all production is handled by a single firm (usually utility co s)

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21 Symmetrical: when two parties pose one another with the same circumstances Dominant Strategy: when a best course of action offers better outcomes Probable Outcome: outcome resulting from all parties pursuing their best course of action Nash Outcome: when no party would opt to deviate from the probable outcome Collusion Opportunity: when an alternative to the probable outcome exists to the benefit both parties

22 Year Quant. Q ch. Price Rev. Rev. ch. P. Index Real 1 10 / 1 10 / / Real ch

23 Inflation: sustained increase in prices Real Growth: increase in units of goods & services Price Index: composite number representing the state of prices

24 Gross Domestic Product: Market value of all new final goods and services produced within a country during a year Consumption: spending by households Durable Consumption: household investments, household spending on items not quickly exhausted (cars, appliances) Non-Durable Consumption: household spending on quickly expendable items (food, fuel, clothing) Investment: purchases by business not intended for resale Government Purchases: items purchased by government- not transfers Net Exports = Export Imports

25 Long-run GDP: level of GDP needed to fully employ all resources Current GDP: current level of output regardless of sustainability Recession: 2 or more successive quarters without growth GDP Gap: current long-run GDP Unemployment Rate: unemployed/(unemployed + employed) Labor Force: unemployed + employed Discouraged: jobless persons wanting but not looking for work Frictional: unemployed persons between employers Structural: the unemployed between occupations and/or locales Cyclical: employment caused by dips in industries Natural Unemployment: all unemployment excluding cyclical

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27 Autonomous Consumption: basic consumption regardless of income MPC = new consumption / new income MPS = new savings / new income APC = consumption / income APS = savings / income Injection: new expenditures introduced in an economy Leakage: lost expenditures and new taxes and savings Expenditure Multiplier = 1/MPS

28 Tax Multiplier = MPC/MPS Federal Reserve System: US central bank system that divorces gov. from money supply control Discount Rate: rate of interest banks borrow from Fed Reserve Ratio: portion of deposits kept as vault cash (reserves) Federal Funds Rate: interest rate banks borrow from each other Term Auction Facility: Fed s policy of making anonymous loans to banks at a rate based on demand Easy Money Policy: lower Disc. Rate and Reserve Ratio, selling of Treasuries and more lending via the Term Auction Facility

29 Flat Tax: rate of tax that remains constant despite taxable amount Progressive Tax: tax rate that intensifies as taxed amount increases Effective Tax Rate: tax/taxable amount Lump Sum Tax: tax that remains the same regardless of income Subsidy: when gov. helps pay for certain activity (negative tax)

30 Compute r C I A L F O R I N I A ID A H O Potato

31 Comparative Advantage: when a country can make a product with a lesser opportunity cost Tariff: port toll charged on imports Reciprocal Trade Agreement Act: a simplified and more favorable set of trade rules, most favored nation status, the US extends to nations who engage in bi-lateral trade talks with US Gen. Agree. On Tariffs & Trade: international convention to simplify trade and reduce barriers World Trade Organization: international organization to remedy trade disputes and foster world trade

32 Growth Compounding: when growth portions are added to the initial principal to further perpetuate future growth Rule of 70: number of periods to double = 70/growth rate orgrowth rate = 70/number of periods to double