Basic Concepts
The resources are limited
What is scarcity?
What does it mean when the point falls outside of PPC?
When price increases, quantity demanded decreases
What is the law of demand?
marginal private cost plus external cost
What is marginal social cost?
The price is higher than market equilibrium price, which causes surplus
Or What is price floor?
The ability to innovate, seek opportunities and take risks
What are the main skills of entrepreneurship?
Production possibility increases. PPC shifts outside.
What happens to PPC of an economy if
there are more resources found.
or there is technology breakthrough
or there is improvement in quality of resources.
What will consumers do when two goods are substitutes?
The good that may have positive externality, and may be ignored by the consumers
What is merit good?
It has opportunity cost, which means the budget is spent in certain area such as hospital, education, the others such as infrastructure, military projects, have to be sacrificed.
What's the side effect of subsidy?
It includes private sector and public sector
What does mixed economy include?
There is no unused resources
What is efficiency in PPC?
Consumer surplus and producer surplus
What is economic welfare?
It is possible that the consumption by one person would reduce consumption by the others.
What is rivalry?
It causes non-price rationing, including waiting in line, and discrimination.
What is the disadvantages of price ceiling?
It is an opinion based on value judgement
What is normative statement?
There is less unemployment.
What is actual growth?
When there is a change in the market, this helps and ensures to restore equilibrium.
What is price mechanism?
The society suffers when there should be more benefit or less cost, yet in the market it does not happen.
What is welfare loss?
Government changes the pollution limit regularly, to motivate the firms to improve the tech and decrease the emission.
It is a phrase, which refers to free market without government intervention.
What is invisible hand of market?
or What is laissez faire?
The productivity of resources for each product is constant
Why is PPC linear sometimes?
When income changes, consumers react differently, as shown by changes in quantity of one specific good.
What does Engel curve show?
Quantity supplied equals quantity demanded at a specific price in a market without an externality. Still needs to consider society. Give at least 2 terms.
What's market equilibrium, social optimum and allocative efficiency?
What's the advantage of self-governance?