Scarcity & Opportunity Cost
What is Scarcity?
allocating limited resources to unlimited wants
What is the Law of Demand?
as price rises, quantity demanded falls
What is the difference between absolute and relative poverty?
Absolute = fixed threshold
Relative = compared to society’s income
What is the world's poorest country by GDP per capita?
Burundi
What is the formula for GDP?
GDP = C + I + G + NX
C = consumption
I = investments
G = government spending
NX = net exports (exports - imports)
What is opportunity cost?
The next best alternative given up.
What does price elasticity of demand measure?
How much quantity demanded changes when price changes
Other than regular wage income, what is included in money income?
Government transfers (social security)
What are three recent causes of poverty?
Coronavirus
Climate Change
War (Ukraine)
If inflation is higher than expected, who benefits: borrowers or lenders?
Borrowers
What does the production possibilities frontier (PPF) represent?
Maximum output of two goods possible with given resources
What happens to the supply of a good when price is set below the equilibrium?
There is a shortage.
What does the Gini Index measure?
Income Inequality
What is the difference between GDP and GNI?
GDP = everything produced inside a country
GNP = everything produced by a country no matter where
What is the natural rate of unemployment?
The unemployment rate that exists when the economy is at full employment. The natural rate includes only frictional (job transitions) and structural (mismatch of skills and jobs) unemployment but excludes cyclical (recession-related) unemployment.
Why are PPF curves in real life bowed out rather than straight?
People have different skills
What is an example of a complement and a substitute?
varies
How does capital gains tax affect the rich vs the poor?
Lower tax on investments benefits the wealthy more than the poor.
What are two arguments economists make for limiting trade?
National security
National identity
What are four factors that determine productivity?
Physical Capital
Human Capital
Natural Resources
Technology
What are two types of Economic Growth?
Specialized and Generalized
What is the difference between shift in the demand curve and movement along the demand curve?
Movement = price change, demand curve remains the same
Shift = market change, demand curve shifts
What is intergenerational elasticity?
How economic advantage passes across generations
What trade agreement replaced NAFTA and what does the acronym stand for?
USMCA (US, Mexico and Canada Agreement)
What is the floating exchange rate?
Currency value changes based on supply and demand