FIRST QUARTER ASSESSMENT REVIEW

Microeconomics

THE STUDY OF THE BEHAVIOR OF INDIVIDUAL PLAYERS—SUCH AS

INDIVIDUALS, FAMILIES, AND BUSINESSES—IN AN ECONOMY

Macroeconomics

THE STUDY OF THE BEHAVIOR OF THE ECONOMY AS A WHOLE;

CONCERNED WITH LARGE-SCALE ECONOMIC ACTIVITY

Consumer

PERSON WHO BUYS GOODS OR SERVICES FOR PERSONAL USE

Producer

PERSON WHO MAKES GOODS OR PROVIDES SERVICES

Need

PERSON WHO MAKES GOODS OR PROVIDES SERVICES

Want

PERSON WHO MAKES GOODS OR PROVIDES SERVICES

Production Possibility Curve (Frontier)A GRAPH USD TO ISLLUSTRATE THE IMPACT

OF SCARCITY ON AN ECONOMY; FOUR ASSUMPTIONS ARE MADE IN PPC’S:

1. All resources are fixed.2. All resources are fully employed.3. Technology is fixed.4. You can only produce two goods.

Underutilization

THE CONDITION IN WHICH ECONOMIC RESOURCES ARE NOT

BEING USED TO THEIR FULL POTENTIAL, RESULTING IN FEWER

GOODS AND SERVICES

Efficiency

THE CONDITION IN WHICH ECONOMIC RESOURCES ARE USED

TO PRODUCE THE MAXIMUM AMOUNT OF GOODS AND SERVICES

Opportunity Cost

THE VALUE OF SOMETHING THAT IS GIVEN UP BY CHOOSING ONE ALTERNATIVE OVER ANOTHER

Trade-off

THE ALTERNATIVE SOMEONE GIVES UP WHEN MAKING AN ECONOMIC

CHOICE

Cost-benefit AnalysisTHE PRACTICE OF EXAMINING THE COSTS AND EXPECTED BENEFITS OF A CHOICE AS AN AID TO DECISION

MAKING

Real CapitalALL THE RESOURCES PEOPLE MAKE

AND USE TO PRODUCE AND DISTRIBUTE GOODS AND SERVICES

ContractA FORMAL, LEGALLY BINDING

AGREEMENT

Future

A contract to buy or sell a stock on a specified future date at a preset

price

Option

A contract giving the investor the right, but not the obligation, to buy or sell

stock at a future date at a preset price

National Association of Securities Dealers Automated Quotation System–

1. Most often referred to as2. Sometimes called over-the-counter

stocks3. The most volatile exchange b/c it

features may hi-tech, insurance, and medical stocks

NASDAQ

DOW JONES INDUSTRIAL AVERAGE-AVERAGE OF 30 STOCKS IN THE MARKET

The DJIA is an index of “blue chip” U.S. stocks. It is called an “average” because it originally was computed by adding up stock prices and dividing by the number of stocks. The 30 companies that make up the DJIA are all major players in their industries; these stocks are widely held by individuals and institutional investors. These 30 stocks represent about 1/5 of the $8 trillion-plus market value of all U.S. stocks.

http://nyjobsource.com/djia.html

Corporate/Junk Bonds

• Issued by companies

• Usually for business expansion

• Highest risk

LESS DEVELOPED COUNTRIES (LDCs)-These countries have a lower GDP, less well developed

industry, and a lower standard of living

Ex. Many African, South American, and Eastern European countries

Six Determinant used to determine the level of development

• DEVELOPED – TRANSITIONAL (DEVELOPING) – LDC 1. PER CAPITA GDP2. HEALTH3. EDUCATION4. ENERGY USE5. CONSUMPTION OF GOODS AND SERVICES6. LABOR FORCE

GDP

•THE MARKET VALUE OF ALL FINAL GOODS AND SERVICES PRODUCED

WITHIN A NATION IN A GIVEN TIME

PER CAPITA GDP

•REAL GDP DIVIDED BY POPULATION

FOUR CATEGORIES FOR FACTORS OF PRODUCTION:

1.LAND2. LABOR

3.CAPITAL 4.ENTREPRENEURSHIP

Who is Adam Smith? (What did he write? What did he believe?)

Wrote The Wealth of Nations; reasoned that people behave in ways that satisfy their economic self-interest therefore, there is an “invisible hand” that guides

the economy and the government should not interfere.

Who determines stock prices?

Consumers looking to purchase the stock determine the stock price

(just like supply and demand with products)

Why do some people make risky investments?

Typically, the riskier the investment, the larger the

opportunity for gain.

PLEASE CHANGE THE QUESTION TO:How would an investor

maximize returns and limit risks?

The investor would want to diversify their portfolio