economics final review

What are the four factors of production?

Land, Labor, Capital, and Entrepreneurship.

What does the Production Possibilities Frontier (PPF) represent?

A curve showing maximum combinations of two goods an economy can produce with given resources.

What is the Law of Demand?

As price increases, quantity demanded decreases and vice versa.

What are the five market elements of the American economy?

Private property, profit motive, consumer sovereignty, competition, voluntary exchange, limited government.

What is a price floor and give an example?

A minimum price set by the government, such as minimum wage, which can lead to surplus.

What is the difference between elastic and inelastic demand?

Elastic demand means quantity changes significantly with price changes; inelastic demand means quantity changes little.

What is the significance of the equilibrium price in a market?

It is the price where supply equals demand, leading to no surplus or shortage.

What are the types of economic systems?

Traditional, Command, Market, and Mixed economies.

How is GDP measured?

Through the expenditure approach: C + I + G + (X - M) or the income approach: wages + rent + profit + interest.

What are the stages of the business cycle?

Expansion, Peak, Contraction/Recession, Trough, and Depression.

What is inflation and what are its types?

Inflation is the increase in prices over time. Types include Demand-Pull and Cost-Push inflation.

What is a monopoly?

A market structure with one firm that has high barriers to entry.

What is the role of interest rates in an economy?

Interest rates influence borrowing costs; higher rates reduce spending while lower rates stimulate loans/spending.

What does 'consumer sovereignty' mean?

The idea that consumers dictate the production of goods and services through their purchasing choices.

What is the impact of taxes on the economy?

Taxes can affect consumer spending and business investment depending on their type and rate.