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What is the definition of Economics?
Economics is the study of unlimited wants and limited resources.
What is the difference between micro and macroeconomics?
Microeconomics focuses on individual behavior and decisions, while macroeconomics examines the economy as a whole.
What is the rationality assumption in economics?
The rationality assumption states that individuals make decisions to maximize their utility or benefit.
What is the difference between positive statements and normative statements?
Positive statements are factual and can be tested, while normative statements are based on opinions or values.
What is the relationship between price and quantity demanded (Qd)?
As price decreases, quantity demanded increases, and vice versa.
What is the relationship between price and quantity supplied (Qs)?
As price increases, quantity supplied increases, and vice versa.
On the vertical axis of a graph, what is the direction of movement?
The direction of movement typically indicates changes in price.
On the horizontal axis of a graph, what is the direction of movement?
The direction of movement typically indicates changes in quantity.
What does Ceteris Paribus mean?
Ceteris Paribus means 'all other things being equal or constant'.
What is free-riding, and can you give an example?
Free-riding occurs when individuals benefit from resources or services without paying for them; an example is public goods like national defense.
True or False: We all face the problem of scarcity.
True.
What are the three fundamental economic questions?
The three fundamental questions are: What to produce? How to produce? For whom to produce?
What does Federal Government spending include?
Federal Government spending includes expenditures on goods and services, but excludes certain transfers and tax expenditures.
What do attainable points, unattainable points, and inefficient points on a PPC or PPF represent?
Attainable points are within the curve, unattainable points are outside the curve, and inefficient points are inside the curve.
Why is the PPC or PPF concave?
The PPC or PPF is concave due to the law of diminishing returns.
What causes the PPF or PPC to shift outward to the right?
The PPF shifts outward due to economic growth, which can result from factors like increased resources or technology.
What are factors that will shift or change demand?
Factors include income, tastes and preferences, prices of related goods, and consumer expectations.
What are factors that will shift or change supply?
Factors include input prices, technology changes, taxes and subsidies, and expectations.
What are inferior goods?
Inferior goods are those goods for which demand decreases as consumer income rises.
What are normal goods?
Normal goods are those goods for which demand increases as consumer income rises.
What is the definition of relative price?
Relative price is the price of one good compared to another, expressed as a ratio.
If Y and Z are complements, what happens to the demand for Z if the price of Y goes up?
The demand for Z decreases.
If the price of Pepsi goes up, what happens to the demand for Coca-cola (Coke)?
The demand for Coca-cola increases.
What is the free rider problem?
The free rider problem occurs when individuals benefit from a resource without contributing to its cost.
What is the theory of public choice?
The theory of public choice analyzes how government decisions are made and how public officials cater to their interests.
What are the consequences of a price ceiling?
Price ceilings can lead to shortages and decreased quality.
What are ways the government corrects negative externalities?
Through taxes, regulations, or providing alternatives.
How will a higher price of crude oil affect the supply of eggs in the market?
It may decrease the supply of eggs if the cost of production increases.
What is the sign of a demand equation?
The sign of a demand equation is typically negative.
What is the sign of a supply equation?
The sign of a supply equation is typically positive.
How can the government correct positive externalities?
By subsidizing goods or providing public services.
How can the government correct negative externalities?
By imposing taxes or regulations.
From the minimum wage diagram, how will you know how many workers were employed?
You look at the intersection of the demand for labor and the supply of labor.
What is opportunity cost?
Opportunity cost is the value of the next best alternative foregone when making a decision.
What happens in the market if it is in equilibrium and demand goes up?
Price will increase, and quantity supplied will eventually rise.
What is a government-sponsored good?
A government-sponsored good is a good that receives government funding or support.
What are government-inhibited goods?
Government-inhibited goods are goods restricted or banned by government policy.
What do points inside, outside, and along the PPC or PPF represent?
Inside represents inefficiency, outside represents unattainable, and along represents efficient production.
Why is a PPF or PPC concave?
It is concave due to the law of increasing opportunity costs.
What does it mean that economists are social scientists?
Economists study human behavior and decision-making in relation to production and consumption.
How are scarcity and shortage different?
Scarcity is a permanent and ongoing condition, while shortage is a temporary imbalance between supply and demand.
What are all the factors determining (shifting) supply?
Factors include technology, input prices, taxes, number of sellers, and expectations.
How do you compute consumer surplus?
Consumer surplus is calculated as the difference between what consumers are willing to pay and what they actually pay.
What is a price floor and what are examples?
A price floor is a minimum allowable price; examples include minimum wage laws.
What is a price ceiling and what are examples?
A price ceiling is a maximum allowable price; examples include rent control.
In a price ceiling, how will you know how many units are demanded?
You look at the price set by the ceiling and determine quantity demanded at that price.
What is an externality?
An externality is a cost or benefit incurred by a third party who did not choose to incur that cost or benefit.
What is the primary difference between public goods and private goods?
Public goods are non-excludable and non-rivalrous, while private goods are excludable and rivalrous.
What are the economic functions of the Government?
The government's economic functions include regulation, taxation, and provision of public goods.
What is the definition of production?
Production is the process of transforming inputs into outputs or creating goods and services.
What is the difference between a market-based economy and a command economy?
A market-based economy is driven by supply and demand, while a command economy is centrally planned by the government.
What are the factors of production?
The factors of production include land, labor, capital, and entrepreneurship.
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