Principles of Economics Practice Flashcards

A set of vocabulary flashcards covering the fundamental concepts and principles of economics as discussed in the lecture notes.

Economics

A social science that studies how individuals, businesses, and governments make choices about allocating limited resources to satisfy their unlimited wants and needs.

Scarcity

The condition where resources are limited, but human wants are unlimited, forcing people to make choices.

Opportunity Cost

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

Rational Choice

The process where individuals weigh costs and benefits to make decisions that maximize their satisfaction or benefit.

Marginal Thinking

The principle of making decisions based on additional benefits and costs, specifically choosing an action if its marginal benefit is $\geq$ its marginal cost.

Incentives

Financial or non-financial factors, such as salaries, bonuses, or recognition, that motivate people to act in a certain way.

Supply and Demand

The interaction between producers and consumers that determines the prices of goods and services.

Law of Demand

The economic principle stating that higher prices lead to lower demand.

Law of Supply

The economic principle stating that higher prices lead to higher supply.

Market equilibrium

The state resulting from the balance of supply and demand.

Trade-offs

The act of giving up one option to choose another, necessitated by the reality of scarcity.

Efficiency

The use of resources in a way that maximizes total benefit with minimal waste.

Productive efficiency

A type of efficiency where goods are produced at the lowest possible cost.

Allocative efficiency

A type of efficiency where resources are aligned with consumer preferences.

Equity

The fair distribution of resources and wealth within a society.

Public goods

Services provided by the government, such as roads and defense, to correct market failures and provide stability.

1. What is the study of how limited resources are allocated to satisfy unlimited wants and needs?

   • A. Sociology

   • B. Economics

   • C. Geography

   • D. Psychology

B

2. Which principle states that resources are limited while human wants are unlimited?

   • A. Equity

   • B. Efficiency

   • C. Scarcity

   • D. Incentives

C

3. What is the value of the next best alternative given up when making a choice?

   • A. Profit

   • B. Trade-off

   • C. Incentive

   • D. Opportunity Cost

D

4. Which economic question asks which goods and services should be prioritized?

   • A. How to Produce

   • B. What to Produce

   • C. For Whom to Produce

   • D. When to Produce

B

5. According to the Law of Demand, when prices increase, demand generally:

   • A. Increases

   • B. Remains the same

   • C. Decreases

   • D. Doubles

C

6. Which indicator measures the total value of goods and services produced within a country’s borders?

   • A. GNP

   • B. Inflation Rate

   • C. GDP

   • D. Price Index

C

7. Which indicator measures income earned by a country’s residents, including income from abroad?

   • A. GDP

   • B. GNP

   • C. CPI

   • D. Inflation

B

8. What tracks changes in the prices of a standard basket of goods and services over time?

   • A. Price Index

   • B. GDP

   • C. Opportunity Cost

   • D. Equity

A

9. Which business function involves determining output levels and selecting technologies?

   • A. Pricing Decisions

   • B. Investment Decisions

   • C. Production Decisions

   • D. Marketing Decisions

C

10. Which economic goal focuses on the fair distribution of resources and wealth?

• A. Efficiency

• B. Stability

• C. Growth

• D. Equity

D

1. Enumerate the 4 factors/resources of production.

Land, Labor, Capital, Entrepreneurship

2. Enumerate the 3 fundamental economic questions.

What to Produce, How to Produce, For Whom to Produce

3. Enumerate the 5 economic goals mentioned in the lesson.

Growth, Efficiency, Equity, Stability, Full Employment

6. Enumerate 4 basic principles of economics.

GDP, GNP, Price Indices, Inflation Rates

5. Enumerate the 3 types of business decisions discussed in strategic planning.

Production Decisions, Pricing Decisions, Investment Decisions

6. Enumerate 4 basic principles of economics.

Scarcity, Opportunity Cost, Rational Choice, Marginal Thinking

7. Enumerate the 2 types of efficiency.

Productive Efficiency, Allocative Efficiency

8. Enumerate 4 ways governments intervene in the economy.

Correct Market Failures, Provide Public Goods, Regulate Markets, Promote Fairness and Stability

9. Enumerate 4 factors that influence business decision-making under scarcity.

Limited Financial Resources, Skilled Labor Scarcity, Cost Management, Economic Conditions

10. Enumerate 4 concepts linked to the basic economic problem.

Scarcity, Choice, Trade-offs, Opportunity Cost

1. Why do individuals, businesses, and governments need to make choices?

   • A. Resources are unlimited

   • B. Wants are limited

   • C. Resources are scarce

   • D. Prices never change

A

2. Which principle states that people compare costs and benefits before making decisions?

   • A. Rational Choice

   • B. Equity

   • C. Supply

   • D. Inflation

A

3. What is an example of an incentive?

   • A. A tax refund

   • B. Scarcity

   • C. GDP

   • D. Opportunity Cost

A

4. If a company earns more profit by producing one additional unit, it is applying:

   • A. Equity

   • B. Marginal Thinking

   • C. Scarcity

   • D. Inflation

B

5. Which of the following is NOT an economic indicator?

   • A. GDP

   • B. GNP

   • C. Price Index

   • D. Opportunity Cost

D

6. Inflation affects consumers because it:

   • A. Increases purchasing power

   • B. Reduces purchasing power

   • C. Eliminates scarcity

   • D. Increases supply

B

7. Which factor influences how goods and services are distributed among people?

   • A. Equity

   • B. Weather

   • C. Geography

   • D. Culture

A

8. A firm deciding whether to buy new machines or hire more workers is answering:

   • A. What to Produce

   • B. How to Produce

   • C. For Whom to Produce

   • D. Where to Produce

B

9. Which economic indicator is commonly used to measure economic growth?

   • A. Inflation Rate

   • B. Price Index

   • C. GDP

   • D. Opportunity Cost

C

10. Which of the following is a result of scarcity?

• A. Unlimited production

• B. Trade-offs

• C. Equal wealth

• D. No decision-making

B

1. Give the 3 groups affected by scarcity.

Individuals, Businesses, Governments

2. Give the 3 fundamental economic questions.

What to Produce, How to Produce, For Whom to Produce

3. Give the 4 economic indicators discussed in the lesson.

GDP, GNP, Price Index, Inflation Rate

4. Give the 3 strategic business decisions.

Production Decisions, Pricing Decisions, Investment Decisions

5. Give 4 effects of scarcity.

Choices, Trade-offs, Opportunity Costs, Resource Allocation

6. Give 4 examples of limited resources.

Land, Labor, Capital, Entrepreneurship

7. Give 4 economic principles from Lesson 1.

Scarcity, Opportunity Cost, Rational Choice, Marginal Thinking

8. Give 4 factors businesses consider when making decisions.

Consumer Demand, Production Costs, Inflation, Economic Growth

9. Give 4 roles of government in the economy.

Correct Market Failures, Provide Public Goods, Regulate Markets, Promote Fairness and Stability

10. Give 4 concepts related to inflation and prices.

10. Price Index, Inflation Rate, Purchasing Power, Cost of Living