Giovanni Robles

Study Guide: Econ Systems – Demand

7 BASIC PRINCIPLES OF THE FREE ENTERPRISE SYSTEM

A. PROFIT MOTIVE: Encourages people to make money

B. OPEN OPPORTUNITY: Everyone can compete in the market

C. LEGAL EQUALITY: Everyone has the same legal rights

D. PRIVATE PROPERTY RIGHTS: People have the right to control their possessions as they see fit.

E. FREE CONTRACT: People may decide what agreements they want to enter.

F. VOLUNTARY EXCHANGE: People may decide what and when they want to buy and sell.

G. COMPETITION: Rivalry among sellers to attract customers while lowering costs.

TRANSITION

Period of change in which an economy moves away from a centrally planned economy, into a
market economy. In the modern day, China moved into a market economy and now depends on
American Consumerism to manage the economy. Russia can also be claimed with a similar
background to China, as it is a mixed economy facing turmoil from Russia's citizens. The
economic deficiency now affects citizens from the global collapse of oil prices.

INCENTIVE

Expectations that encourage people to behave in a certain way.

MACROECONOMICS

The study of behavior and decision-making of entire economies.

MICROECONOMICS

The study of economic behavior and decisions of small units, such as individuals, families, and
businesses.

GROSS DOMESTIC PRODUCT

The total value of final goods and services in a particular economy.

DEMAND

The quantity of a good or service that consumers are willing and able to buy at various prices.

LAW OF DEMAND

As the price of a good or service increases, the quantity demanded decreases, and vice versa.

SUBSTITUTION GOOD

Goods that are used in place of another which satisfies the same basic "want" as another
product.

a. EX: A hybrid vehicle

b. EX: Smart watches
c. EX: Air pods > Headphones

COMPLEMENTARY GOOD

A product that is used together with another product.

a. EX: Toilet + Toilet Paper

b. EX: Paper + Pen
c. EX: Sheet Music + Music Stand

DEMAND CURVE

A graphic representation of a demand schedule.

NORMAL GOODS

Good that consumers demand more of when the income of the consumer increases.
INFERIOR GOODS

Goods that consumers demand less of when the income of the consumer increases.

ELASTICITY

Measure of the degree to which the quantity demanded or supplies of a good or service changes
in response to change in price.

ELASTIC

Describes demand that is very sensitive to a change in price.

INELASTIC

Describes demand that is not very sensitive to a change in price.

TOTAL REVENUE

The total amount of money a firm receives by selling goods or services.

PRIVATIZATION

Selling state-run firms to individuals.

PUBLIC GOOD

Shared goods/services that do not make sense to exclude people who do not pay for it, or to
make consumers pay individually for it.

INDIVIDUAL DEMAND SCHEDULE

The Individual Demand Schedule table lists the quantity of goods that one person will buy at
each price. In order to make the table it should be split into two columns, one listing the price of
a product and its other column listing the quality demand of an object. The rows usually list the
criteria as the price increases/decreases, affecting the quantity. This table can be differentiated
from the market demand table, as individual demand quantity usually comes in small amounts
as per individual demand.
MARKET DEMAND SCHEDULE

The Market Demand Schedule table lists the quantity of goods all consumers in the market will
buy at a different price. In order to make the table it should be split into two columns, one
listing the price of a product and its other column listing the quality demand of an object. The
rows usually list the criteria as the price increases/decreases, affecting the quantity. This table
can be differentiated from the individual demand table, as market demand quantity usually
masses in large amounts as the spending according to how much all consumers are willing to
buy.

MODERN ECONOMY OF RUSSIA

In the modern day, Russia transitioned into a mixed economy economy on the contrary of a
Communist Economy, yet still faces the turmoil of its citizens. Because of the economic/oil crisis
in Russia- including a lack of sanction for citizens' complaints of the economic structure, there is
now a Civil Chamber mediating disputes between citizens and the government. The government
negatively impacts the economy as almost no one is paid their salaries even when many people
are working to pay for their lives. The low Russian unemployment rate is explained as an
innumerable amount of people protest, especially when middle-class citizens also end up
homeless. The Russian economy has changed from the days in the USSR as people now have the
opportunity for scout for jobs themselves, most successfully in forming their own businesses but
otherwise, turning to failure.

MODERN ECONOMY OF CHINA

In the modern day, China transitioned into a mixed market economy and now depends on
American Consumerism to manage the economy. These economies may impact each other by
sending ripples across the world whenever the Stock Market may Plummet in either. Psychology
may take a role in international economics due to the panic within entrepreneurs whenever
plummet. It can be associated with the stock market as the Chinese depend on Consumer
Spending to keep the Stock Market going, which leads to their panic since they are too used to
Stability.

REASONS WHY THE ECONOMY OF THE USSR COLLAPSED

A. The USSR's economic system was a communist economic system, based on a centrally planned
economy in which all economic and political power is in the hands of the government.

a. Heavy Industry: Heavy Industry usually results in a large investment to produce items used
in other industries, which can include the government using income to build military
 advancements and the industry. This means that the government was not willing to support
the civilian rights of the people.

b. Collectives: Collectives were large farms leased from the state to groups of peasant farmers.
However, because the peasants were extremely inexperienced, they could not support
themselves leading to famine and the death of millions.

c. Economic Communism: Because of Communism, Entrepreneurial activity was not allowed.

This was done so because communism was supposed to rule equality between the people
under the government. Without Entrepreneurial activity, only the government regulated the
economy as trade could only be made from products inside the country.

ADAM SMITH

Adam Smith is also known as the father of economics who published The Theory of Moral
Sentiments, based on the notion of Laissez-Faire economics. According to this economy, Smith's
ideas are about the concept that each person looking out for their self-interest will create a
better outcome from Laissez-faire. The role of self-interest is the reason for the self-motivating
force behind the free market and thus work ethic. Another idea cites competition, that a man
would need to invest his wealth in the enterprise to earn a higher return. The role of
competition is to be the regulating force within the free market and thus give an invisible hand
once cooperating with self-interest.

VLADMIR PUTIN

Serves as the modern-day president of Russia, and he launched an invasion on Ukraine in order
to return the area back to the control of Moscow. The connection to the content is how Russia's
restoration after downfall still hasn't changed the country all that much, since Russia's past of
humiliation focuses on regaining power. Despite that, Russia is now a mixed economy.

HOW DEMOGRAPHIC TRENDS IMPACT THE DEMAND OF A GOOD

A Demographic Trend is a term for any measurable change in the characteristics of a population
over time, which can usually focus on an ethnic group, race, or gender. When impacting the
demand of a good, the Demographic trend used can usually influence the underlying growth
rate since it would be an interest to consumers, supplying greater amounts according to the
amount of population which supports the trend. Businesses may take a look at social media to
find the demographic topics that trended among the vast public, in order to focus on a product
which would favor high demand.
CAPITALISM

A. Economic System in which a country's economy is controlled by private ownership rather than
the state.
a. EX: U.S.

COMMUNISM

A. Political System based around a centrally planned economy in which all economic aid and
political power are in the hands of the government.
a. EX: The USSR

SOCIALISM

A. Social and political philosophy is based on the idea of distributing wealth equally among people
through democratic means.
a. EX: The Republic of India.

COMPETITION

Within the economy, it is known as the Regulating Force within the Free Market, which is
attributed to the Invisible Hand. The Invisible Hand is a force within the market regulating itself
through self-interest and competition working together.

SELF-INTEREST

Within the economy, it is known as one's personal gain, or the motivating force behind the free
market which is attributed to the Invisible Hand. The Invisible Hand is a force within the market
regulating itself through self-interest and competition working together.

ECONOMIC RIGHTS GUARANTEED TO ALL AMERICANS

A. PROPERTY RIGHTS: Property Rights claim that no person shall be deprived of life, Liberty, or
Property. Private Property cannot be taken away from public use without compensating the
owner.

B. TAXATION: Means that Congress can raise/lower taxes. An example of the high taxes may
include gas/oil, alcohol/tobacco, and hotel taxes.
 C. CONTRACTS: Individuals or businesses cannot use the political process to get excused from their
contracts.

SIX FACTORS THAT CHANGE THE DEMAND OF A GOOD.

A. INCOME
B. NUMBER OF CONSUMERS
C. CONSUMERS' TASTES & PREFERENCES
D. CONSUMER EXPECTATIONS
E. PRICE OF SUBSTITUTE GOODS
F. PRICE OF COMPLEMENTARY GOODS

FOUR FACTORS THAT AFFECT THE ELASTICITY OF DEMAND.

A. AVAILABILITY OF SUBSTITUTES
B. PRICE RELATIVE TO THE OUTCOME
C. NECESSITIES VS LUXURIES
D. PRICE CHANGES OVER TIME.