Basic Economics: Micro and Macro Principles, Market Dynamics, and International Trade

What is the definition of economics?

A social science concerned with making optimal choices under conditions of scarcity.

What does the economic perspective emphasize?

Scarcity and choice, purposeful behavior, and rational self-interest.

What is opportunity cost?

The value of the next best alternative that is forgone when a choice is made.

What does 'there's no free lunch' imply?

Every choice involves a cost, even if it is not immediately apparent.

What is marginal analysis?

The comparison between marginal benefit and marginal cost to make decisions.

What is the scientific method in economics?

A process involving observation, hypothesis formulation, testing, and modification.

What is the difference between microeconomics and macroeconomics?

Microeconomics focuses on individual units, while macroeconomics looks at the economy as a whole.

What is positive economics?

The branch of economics that deals with objective facts and cause-and-effect relationships.

What is normative economics?

The branch of economics that involves subjective judgments about what the economy should be like.

What does the Production Possibilities Model illustrate?

It shows the trade-offs and opportunity costs of producing two goods.

What are the assumptions of the Production Possibilities Model?

Full employment, fixed resources, fixed technology, and the production of two goods.

What is economic growth?

An increase in the economy's ability to produce goods and services, often due to more resources or technological advances.

What is the law of demand?

As price falls, quantity demanded rises, and as price rises, quantity demanded falls, all else being equal.

What are the determinants of demand?

Changes in consumer tastes, number of buyers, income, prices of related goods, and consumer expectations.

What is the law of supply?

As price rises, quantity supplied rises, and as price falls, quantity supplied falls, all else being equal.

What are the determinants of supply?

Changes in resource prices, technology, number of sellers, taxes and subsidies, and producer expectations.

What is market equilibrium?

The point where the demand curve and supply curve intersect, determining the market price and quantity.

What is productive efficiency?

Producing goods in the least costly way using the best technology and resource mix.

What is allocative efficiency?

Producing the right mix of goods that society values most highly.

What is the business cycle?

Short-term fluctuations in economic activity, characterized by periods of expansion and contraction.

What is real GDP?

The total value of final goods and services produced within a country's borders, adjusted for price changes.

What is nominal GDP?

The total value of final goods and services produced within a country's borders, measured using current prices.

What is Purchasing Power Parity (PPP)?

An economic theory that compares economies by adjusting for differences in price levels.

What is comparative advantage?

The ability of a country to produce a good at a lower opportunity cost than another country.

What are trade barriers?

Government-imposed restrictions on international trade, such as tariffs and quotas.

What is the economic impact of tariffs?

They can lead to a decline in consumption, an increase in domestic production, and a decline in imports.

What is the case for protectionism?

To protect domestic industries from foreign competition and preserve jobs.