TMFQ

CIA 4UI: Unit 1 – Fundamentals of Economics

Lesson 3

10 Minutes of Freedom Quiz

Answer the following (2 minutes each)

1. Explain the “Guns and Butter” trade off scenario.

• guns: the things spent on to defend it shores 

• butter: the more (guns) are spends the less of consumer goods there is (social security) 

2. Describe the difference between efficiency and equality using social services and taxation.

• Efficiency: society gets the most from its resources (food, money, etc)

• Equality: everyone gets the same resources

• something is taken and given to other for example with taxes money is taken from the rich and given to the poor. that is equality although that makes people not work as hard since there is no rewards. 

• too much taxes hurts efficiency, too little taxation hurts equality 

3. Define opportunity cost? Provide an example.

• giving up something/things to get something else 

• for example if you spend $10 on a movie ticket you could´ve spent it on something else such as lunch. 

• instead of opportunity cost it´s opportunity lost 

• focus on stuff you might lose less off. such as if there isnt a good movie and you are really hungry you will choose the lunch (that´s what government usually do which is why we focus on certain products more. 

4. You are selling your 2007 Mustang. You have already spent $1,000 on repairs. At the last minute, the transmission dies. You can pay $900 to have it repaired, or sell the car “as is.” 

In each of the following scenarios, should you have the transmission repaired? Explain.

1. Blue book value (what you could get for the car) is $7,300 if transmission works, $6,200 if it doesn’t.

• sell it 

2. Blue book value is $6,300 if transmission works, $5,400 if it doesn’t.

• not going to repair 

5. What is an incentive and how are they used by the government? Provide a real life example.

• the reason that makes someone act a certain way

• something used to make you act a certain way (or not want to) 

• such as drinking and driving 

• the incentive such as jail time

CIA 4UI: Unit 3 - Macroeconomics

Lesson 4

10 Minutes of Freedom Quiz

Answer the following (2 minutes each)

1. Explain how people and countries benefit from trade and specialization.

• People can benefit from trade by having access to a wider selection of goods and services at a lower cost. Countries benefit from trade and specialization by getting a better price abroad for goods they produce and buy other goods cheaper abroad than produced at home.

• this results in using least amount of resources and get most out of it 

• specialization makes it possible that use lowest opportunity cost and get the most possible out of it 

2. Outline the 3 questions that are answered with respect to markets working as an organizing activity.

• What to produce? → Based on what people want and what businesses can profit from.

• How much to produce? → Prices and competition help decide how much of a product is made.

• Who gets the goods? → People buy based on their needs, preferences, and budget.

• command economy: government or dictator commands how much and what is being produced

• free market economy: instead of the govemnment the producer and consumers are the ones that decide (supply and demand) 

3. Discuss the concept of “The Invisible Hand”.

• self-interest in free markets benefits society. 

  • Uber is a great example:

  • Traditional taxis are limited by government permits and fixed prices.

  • Uber increases competition, offering more rides at lower prices.

• dont need a govenment to step in and control the economy

• don´t need the government to get a country out of a recession 

• the relation between the producer and consumer solves this

• don´t need a government to decide the price for example

• the producer and consumer supply and demand solves it 

4. Describe 3 ways in which governments can intervene in order to help markets.

• Protect property rights (e.g., patent laws)

• Fix market failures (e.g., pollution regulations)

  • externality: when there is a negative aspect to you making a product 

• Promote fairness (e.g., taxes and welfare programs)

•  for example if people find a cure for cancer there is no price to it as someone can afford it and spend millions in a heartbeat while others can never afford it. the sky is the limit 

5. Provide a real-world example for each of the 3 government interventions in question 4 above.

• self phone cost: we have only 

• carbon capture law

CIA 4UI: Unit 1 - Economic Fundamentals

Lesson 5

10 Minutes of Freedom Quiz

Answer the following (2 minutes each)

1. Explain how a country’s production is related to its standard of living and offer 2 ways in which a country can increase its production.

• A country’s production is directly related to its standard of living because higher production means more goods and services per person. A country can increase production by improving worker skills (education/training) and investing in better technology and equipment.

2. Explain why the Canadian government doesn’t just print enough money to pay off all of Canada’s debt.

• The Canadian government doesn’t print money to pay off debt because excessive money supply causes inflation. More money in circulation reduces its value, increasing prices and reducing purchasing power.

3. Describe the short run tradeoff between unemployment and inflation. Is this currently happening in Canada, explain.

• In the short run, inflation and unemployment move in opposite directions. When inflation rises, unemployment tends to fall, and vice versa. We had high inflation in covid years, while now we have less inflation rate, yet unemployment is still up. 

4. Briefly outline the economic philosophy of Karl Marx.

• Karl Marx’s economic philosophy focuses on class struggle and the flaws of capitalism. He believed capitalism exploits workers and should be replaced by a classless, communist society where production is collectively owned.

5. If you could change our current economic system, what changes would you make and why?

• I would reduce wealth inequality by implementing fair wages and universal basic income. This ensures that economic growth benefits everyone, not just the wealthy, and improves overall living standards.

Lesson 6 TMQ

1. Production Possibilities Frontier (PPF): The PPF shows the maximum amounts of two goods that can be produced with given resources and technology.

   • Points on the Curve: These show the best use of resources, meaning everything is produced efficiently.

   • Points Inside the Curve: These indicate that not all resources are being used effectively; more of both goods could be made.

   • Points Outside the Curve: These points are not possible to achieve with current resources.

2. Law of Increasing Opportunity Cost: This law explains that as you produce more of one good, the cost of producing each additional unit increases. This happens because not all resources are equally good for making both products, so switching to produce more of one means using less efficient resources.

3. Circular Flow Matrix: This is a model that shows how money and goods flow through an economy. It illustrates how households provide factors like labor to businesses, and in return, they receive payment. Businesses then use these factors to create goods and services that are sold back to households.

4. Difference Between Factor Payment and Transfer Payment:

   • Factor Payment: Payments made for the use of resources, like wages for work or rent for property.

   • Transfer Payment: Payments made by the government to individuals without any exchange, like welfare checks or pensions.

5. Microeconomics vs. Macroeconomics:

   • Microeconomics: Looks at individual choices or specific markets (e.g., how a price change affects coffee sales).

   • Macroeconomics: Looks at the economy as a whole (e.g., how changes in government spending affect national growth).

   • Positive Statement: "Raising interest rates will lower the money available in the economy."

   • Normative Statement: "The government should help everyone get free healthcare."

Lesson 9 TMFQ

• Difference between Absolute Advantage and Comparative Advantage:

  • Absolute advantage means being able to produce more of something than someone else using the same resources. For example, if you can make 10 cookies while your friend can make only 5, you have an absolute advantage in cookie production.

  • Comparative advantage means being able to produce something with less sacrifice of other goods. If you can make cookies giving up just 1 cake, while your friend has to give up 2 cakes to make cookies, you have a comparative advantage in cookies.

• Work Allocation for Roommates:

  • Mark takes 30 minutes to cook and 20 minutes to wash laundry, so it takes him 50 minutes in total. His roommate can cook in 15 minutes and do laundry in 10 minutes, totaling 25 minutes. To get things done quicker, the roommate should handle both tasks since he completes both in just 25 minutes compared to Mark's 50 minutes.

• Absolute Advantage in US and China:

  • The US can make 10,000 planes or 30,000 toys, while China can make 4,000 planes or 20,000 toys. This means the US can produce more of both planes and toys than China, so it has an absolute advantage in both products.

• Comparative Advantage in Planes and Toys:

  • For planes, the US gives up 3 toys for each plane it makes, while China gives up 5 toys for each plane. So, the US has a comparative advantage in making planes. For toys, China gives up only 1/5 of a plane for each toy, while the US gives up 1/3 of a plane for each toy. Thus, China has a comparative advantage in making toys.

• Acceptable Terms of Trade:

  • A good deal for both countries would be trading one plane for four toys. The US gains toys easier than by making them and China gets more toys than its own cost of 5 toys per plane. So, both sides benefit from this trade arrangement.

Lesson 11 TMFQ

What is the Law of Demand?

• The Law of Demand says that when the price of a product goes down, people buy more of it, and when the price goes up, they buy less.

• Demand Schedule: This is a table showing how many items people want to buy at different prices. For example, if the price of milk drops from $4 to $1, people will buy more milk.

• Demand Curve: This is a graph that shows the same information as the demand schedule and slopes downward, indicating that lower prices lead to higher quantities demanded.

1. Specialization of Colombia and Peru:

   • Colombia: With the ability to produce 25 apples or 15 oranges, Colombia should focus on making oranges because it gives the best return on resources.

   • Peru: Since Peru can produce more apples (50) relative to oranges (40), it should specialize in apples.

2. Three Reasons for Downward Sloping Demand Curve:

   • Substitution Effect: When the price of one good drops, people buy more of it instead of other similar items (substitutes).

   • Income Effect: Lower prices increase how much money people have to spend, allowing them to buy more. Higher prices reduce spending power, so they buy less.

   • Law of Diminishing Marginal Utility: The more of a good you consume, the less satisfaction each additional unit gives you, so you’ll buy more only if the price is lower.

3. Differences between Normal Goods, Inferior Goods, Complements, and Substitutes:

   • Normal Goods: When people earn more money, they buy more of these goods, and when they earn less, they buy less.

   • Inferior Goods: These are the opposite; demand goes down as income goes up because people switch to better options.

   • Complements: Products that go together; if the price of one goes up, demand for the other goes down (like milk and cereal).

   • Substitutes: Products that can replace each other; if the price of one goes up, the demand for the alternative goes up (like cow's milk vs almond milk).

4. Five Shifters of the Demand Curve:

   • Taste and Preferences: If people suddenly like a product more or less, it shifts demand.

   • Number of Consumers: More people in the market means more demand.

   • Price of Related Goods: If the price of a substitute rises, demand for the original product increases. If the price of a complementary product falls, demand for the original increases.

   • Income: If people's income changes, it affects what they buy.

   • Change in Expectations: If people think prices will rise in the future, they may buy more now; if they expect prices to drop, they may hold off on purchases.

Lesson 12 TMFQ

1. What is the Law of Supply and how is it illustrated in both a supply schedule and a supply curve?The Law of Supply states that when the price of a product goes up, the amount of that product that producers are willing to make and sell also goes up. This relationship can be shown in a supply schedule (a chart that shows how much of a product is supplied at different prices) and in a supply curve (a graph that shows this relationship with price on one axis and quantity on the other).

2. Explain the difference between individual supply and market supply.Individual supply refers to how much one producer is willing to sell at various prices. Market supply is the total amount that all producers together are willing to sell at those prices. For example, individual supply is like one pizza shop, while market supply includes all the pizza shops in a town.

3. What happens to the supply of a product when the price increases?When the price of a product increases, producers generally want to supply more of it. This means they will offer more for sale, resulting in an upward movement along the supply curve.

4. Explain the 5 shifters of the supply curve.

1. Change in Price of Inputs/Resources: If the cost of essential supplies (like cheese or dough for pizza) rises, the supply decreases because it becomes more expensive to produce.

2. Number of Producers: More pizza shops opening means the overall supply of pizza increases.

3. Change in Technology: Improvements in technology (like better ovens) can increase supply because producers can make products more efficiently.

4. Government Involvement: Government subsidies (financial support) can increase supply, whereas taxes can decrease supply because they raise production costs.

5. Future Expectations: If producers expect higher profits in the future, they might hold back on current production, reducing the current supply.

Lesson 13 TMFQ
Equilibrium of the Market

The equilibrium of the market is the point where the amount of a product that suppliers want to sell matches the amount that consumers want to buy. At this point, there are no leftover products (surplus) or unfulfilled demand (shortage). In the apple market, for example, the equilibrium price is about $2.15 per pound, and the number of pounds bought and sold at that price is about 2200 pounds.

Concept of Surplus

A surplus happens when there are more products available than what consumers want to buy at a certain price. For instance, if apples are sold for $3, producers might have 3000 pounds available, but consumers only want 1300 pounds. This creates a surplus of 1700 pounds. When there's a surplus, producers may lower their prices to help sell the extra apples.

Concept of Shortage

A shortage occurs when consumers want to buy more of a product than what is available at a certain price. For example, if apples are priced at $1, people might want to buy 4000 pounds, but producers are only able to supply 1000 pounds. This leads to a shortage of 3000 pounds. In cases of shortage, prices usually go up because consumers are competing to get the limited apples that are available.

Equilibrium Price and Quantity in Pizza Market

Based on the pizza market data provided, the equilibrium price occurs at $6. At this price, the quantity of pizzas demanded (81) is equal to the quantity supplied (81).

Market Adjustment Toward Equilibrium

If the price is higher than the equilibrium price (like at $7), it means there’s too much product available (surplus). Producers will likely reduce prices to sell more of their products, moving the market back toward equilibrium. On the other hand, if the price is lower than the equilibrium price (like at $5), more people want to buy the product than is being offered (shortage). This situation typically causes prices to rise as producers notice they can charge more due to high demand, which also drives the market back toward equilibrium.

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Lesson 14 TMFQ

Difference between a change in the quantity supplied and a change in supply:

• A change in the quantity supplied refers to a movement along the supply curve due to a change in the price of the good, leading to an increase or decrease in the quantity offered for sale at each price point.

• A change in supply, on the other hand, indicates a shift of the entire supply curve to the right (increase in supply) or left (decrease in supply) due to factors other than price, such as production costs, technology, or external impacts (e.g., regulations).

2. Analysis of the Canadian Beef Industry:

• Scenario 1: Steak has been proven to reduce the effects of Alzheimer’s disease.

  • Demand Impact: Positive health news would likely increase consumer preference for steak, leading to a rightward shift in the demand curve.

  • Equilibrium Effect: Equilibrium price and quantity would increase as more consumers seek to purchase steak.

• Scenario 2: Chicken has been labeled as a group 1 carcinogen.

  • Demand Impact: Consumers may shift their preferences away from chicken and towards beef, particularly steak, increasing demand for beef and causing a rightward shift in the demand curve.

  • Equilibrium Effect: Equilibrium price and quantity for beef would increase as chicken is seen less favorably.

• Scenario 3: Cattle farmers de-unionize and wages decrease.

  • Supply Impact: A decrease in wages might lower production costs, leading to an increase in supply as farmers can produce more beef at a lower cost, shifting the supply curve to the right.

  • Equilibrium Effect: The equilibrium price may decrease while the quantity increases due to increased supply.

• Scenario 4: An outbreak of Mad Cow Disease is found in Canada.

  • Supply Impact: This would cause a significant decrease in supply as consumers and producers reduce demand for beef due to safety concerns, shifting the supply curve to the left.

  • Equilibrium Effect: The equilibrium price would increase while the equilibrium quantity would decrease, leading to higher prices for beef in the market due to the reduced supply.

Lesson 15 TMFQ

Difference Between Elastic, Unit Elastic, and Inelastic Demand:

• Elastic Demand: When the elasticity coefficient is greater than 1. This means that the quantity demanded is highly responsive to price changes (e.g., if price increases, quantity demanded decreases significantly).

• Unit Elastic Demand: When the elasticity coefficient is exactly 1. This indicates that the percent change in quantity demanded is equal to the percent change in price (e.g., if price increases by 20%, quantity demanded decreases by 20%).

• Inelastic Demand: When the elasticity coefficient is less than 1. This means that quantity demanded changes very little in response to price changes (e.g., gasoline, where a price increase results in a slight decrease in quantity demanded).

1. Effect on Total Revenue if XYZ Corp. Raises Price:

   • If XYZ Corp.'s product has an elasticity of demand of 3.25 (elastic), raising the price will lead to a decrease in total revenue. This is because the decrease in quantity demanded will outweigh the increase in price.

   • If XYZ Corp.'s product has an elasticity of demand of 0.75 (inelastic), raising the price will lead to an increase in total revenue. In this case, the small decrease in quantity demanded is outweighed by the increase in price.

2. Three Determinants of Price Elasticity of Demand:

   • Availability of Substitutes: More substitutes lead to greater elasticity because consumers can easily switch to other products.

   • Necessity vs. Luxury: Necessity goods tend to have inelastic demand (e.g., gasoline), while luxury goods tend to have elastic demand.

   • Proportion of Income: Products that take a larger portion of consumers' income tend to be more elastic (e.g., costly electronics) compared to cheaper items.

3. Elastic and Inelastic Goods:

   • Elastic Goods:

     1. Airline tickets (many alternatives available)

     2. Restaurant meals (many substitutes exist)

     3. Designer clothing (considered a luxury item)

   • Inelastic Goods:

     1. Insulin (essential for diabetes patients)

     2. Salt (few substitutes available, necessity)

     3. Cigarettes (addictive, limited substitutes)

4. Calculating Price Elasticity of Demand:

   • For the first situation:

     • Initial Price = 100; New Price = 135

     • Initial Quantity = 85; New Quantity = 35

     • % Change in Quantity Demanded = ((35 - 85)/85) * 100 = -58.82%

     • % Change in Price = ((135 - 100)/100) * 100 = 35%

     • Elasticity of Demand = (-58.82% / 35%) = -1.68

   • For the second situation:

     • Initial Price = 2399; New Price = 2599

     • Initial Quantity (not provided): Let's assume it is "X" (need values to compute)

     • % Change in Quantity Demanded = ((New Quantity - Initial Quantity)/Initial Quantity) * 100

     • % Change in Price = ((2599 - 2399)/2399) * 100 = 8.33%

     • Elasticity of Demand = (calculated % change in quantity demanded) / 8.33%.