Economics: Key Concepts, Theories, and Market Systems

What is economic theory

a set of ideas or principles used to explain how the economy works and predict how people, businesses, and governments will behave.

What does ceteris paribus mean

Other-things-equal assumption :The assumption that factors other than those being considered did not change.)is a Latin phrase that means "all other things being equal" or "holding all other variables constant"in economics is a reference to how one isolated variable may change an economic environment assuming all other variables remain the same.

If the market price in the is below equilibrium, what will this create

creates a shortage (or excess demand)

What are the virtues of the market system

efficiency, incentives, freedom

Describe a ship of the production possibility curve (ppc)

he curve bends outward away from the origin (like a hill or a dome).The Meaning: This shape shows increasing opportunity costs.-straight, vertical, horizontal-

When the price of coffee goes up, what happens to the demand of sugar that is a compliment

the demand for sugar decreases, shifting the sugar demand curve to the left

As the demand for a product increases, the marginal opportunity cost also increases, which law does this explain

Law of Increasing Opportunity Cost. [1]As more of a particular good is produced, its marginal opportunity costs increase

What is an economic system

Set of institutionalized arrangements, Coordinating mechanism,the method a society uses to allocate scarce resources and distribute goods and services through the decisions of individual households and firms

What are the elements of the scientific method of study

is the procedure for the systematic pursuit of knowledge involving the observation of facts and the formulation of testing hypotheses to obtain theories, principles, and laws. It consists of several elements: Observe., Formulate a hypothesis., Test the hypothesis., Accept, reject, or modify the hypothesis., Continue to test the hypothesis, if necessary

What are normative statements in economics

Economic statements that involve value judgments.Based on personal values, ethics, or political ideologies rather than scientific data

What is productive efficiency

when an economy or firm produces goods and services at the lowest possible cost per unit without wasting any scarce resources, 1. Producing goods in the least costly way, 2. Using the best technology, 3.Using the right mix of resources

What is laissez faire capitalism- government exists- what does government do

Keep the government from interfering. Power of government needed to: Protect private property from theft. Provide a legal environment for contract enforcement. People interact in markets to buy and sell.

Which of the characteristics is of the command system what are the characters of the command system

is known as Socialism Or Communism. Government ownership of resources. Decisions made by a central planning board. Examples: North Korea, Cuba, Myanmar. Command systems fail to deliver adequate amounts of goods and services.Coordination problem, Must correctly set output targets for All goods and services. Incentive problem,No adjustments for surplus or shortage.

When consumers like you do with their dollars what happens in the economy

(if we all buy apple phones, apple makes profit, if we all dont they go bankrupt, we decide which business survive and which dont): answer is a, consumer demand

What is productive efficiency

Producing goods in the least costly way, Using the best technology, Using the right mix of resources

To realize full production, what most countries do.

Answer is c or a The market system is a mix of decentralized decision making with some government control. Systems found in much of the world. Private markets are dominant force. Private ownership of resources. Self-interested behavior. specializing in goods/services where they have a comparative advantage and trading with other countries.

When the interests of individuals and firms of society align, what is responsible for this?

answer bThe Invisible Hand, refers to how individuals and firms pursuing their own self-interest can unintentionally promote the interests of society as a whole through the market system.

The ability of forces of demand and supply to establish a price, defines what

Market Equilibrium Equilibrium occurs where the demand curve and supply curve intersect. Or its Price mechanism or price system

According to law of demand and supply, what is implication of price to individuals and businesses (what will stop you from buying something) \

price, For individuals/consumers: Price is an obstacle (barrier) — a higher price can stop you from buying something. For businesses/producers: Price is an incentive — a higher price encourages businesses to produce and sell more because they can earn more profit.

What happens in the face of positive externalities, (something about producing)

The market tends to underproduce the good or service.- underproduction/underconsumption

What are the characteristics of private goods

are produced in the market by firms. Characteristics: Rivalry, Excludability