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Microeconomicthe study of the economic behavior and decision making of small units, such as individuals, families, and businesses
Macroeconomicsthe study of behavior and decision making of entire economies
4 Types of Economies1. Market 2. Command 3. Mixed 4. Traditional
Market Economyeconomic decisions are made by individuals and are based on exchange, or trade
Command (Centrally Planned) Economythe central gov. makes all decisions about the production and consumption of goods and services
Mixed Economya market-based economic system in which the government has some involvement
Traditional Economyrely on habit, custom, or ritual to decide what to produce, how to produce it, and to whom to distribute it
3 Factors of Productionland, labor, and capital; the three groups of resources that are used to make all goods and services
Landnatural resources used to make goods and resources
Laborthe effort that people devote to a task for which they are paid
Capitalany human-made resource that is used to create other goods and services
What are the 3 questions that every country must answer?1. What goods and services should be produced? 2. How should these goods and services be produced? 3. Who consumes these goods and serivces?
Gross Domestic Product (GDP)the total value of all final goods and services produced in a particular economy
Trade offsall the alternatives that we sacrifice when we make a decision
Opportunity Coststhe most desirable alternative given up as the result of a decision
Elasticity of Demanda measure of how consumers respond to price changes
Elasticdescribes demand that is very sensitive to a change in price
Inelasticdescribes demand that is not very sensitive to price changes
Scarcitylimited quantities of resources to meet unlimited wants
General Partnershippartners share equally in both responsibility and liability
Law of Demandconsumers will buy more of a good when its price is lower and less when its price is higher
Law of Supplytendency of suppliers to offer more of a good at a higher price
Budget SurplusA situation in which budget revenues exceed expenditures
Limited Partnershipone partner is required to be a general partner or to have unlimited personal liability for the firm
Vertical Mergerthe combination of two or more firms involved in different stages of producing the same good or service
Horizontal Mergerthe combination of two or more firms competing in the same market with the same good or service
Corporationa legal entity, or being, owned by individual stockholders, each of whom has limited liability for the firm's debts
Price Ceilinga maximum price that can legally be charged for a good or service
Price Floora minimum price for a good or service
Different Types of Partnerships1. General Partnership 2. Limited Partnership 3. Limited Liability Partnership
Franchisea contract that gives a single firm the right to sell goods within an exclusive market
Monopolya market in which a single seller dominates
Variable Expenseskinds of spending that can be controlled and typically change from month to month
Fixed ExpensesExpenses which stay basically the same from month to month, such as housing and transportation
Inflationa general increase in prices across an economy
Bankan institution for receiving, keeping, and lending money
Limited Liability Partnershipnewer type of partnership; all partners are limited partners
Sole Proprietorship Advantages1. Ease of Start-Up 2. Relatively Few Regulations 3. Sole Receiver of Profit 4. Full Control 5. Easy to Discontinue
Monopolistic Competitiona market structure in which many companies sell products that are similar but nor identical
Budget Deficitsa situation in which budget expenditures exceed revenues
What is deficit spending?government spending, in excess of revenue, of funds raised by borrowing rather than from taxation
Sole Proprietorshipa business owned and managed by a single individual



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