Scarcity & Opportunity Cost
What is the fundamental economic problem that forces individuals and societies to make choices?
What is scarcity?
What factor of production refers to natural resources?
Land
A point inside the PPC represents what?
Inefficient use of resources.
According to the Law of Demand, when price increases, what happens to quantity demanded?
It decreases.
What is the market-clearing price called?
Equilibrium price.
What is the value of the next best alternative given up when making a choice?
What is opportunity cost?
Which factor includes skills and education?
Human capital
Country A produces more cars than Country B with the same resources. What does Country A have?
Absolute advantage.
A movement along the demand curve is a change in _______.
Quantity demanded.
When price is above equilibrium, what results?
Surplus.
During a recession, where would a country’s production point be on the PPC?
Inside the curve.
In the circular flow model, households provide _______.
Factors of production.
Trade is based on which type of advantage that considers opportunity cost?
Comparative advantage.
A new harvesting technology for coffee shifts which curve?
Supply curve (to the right).
When price is below equilibrium, what results?
Shortage
Which phrase describes economics as the study of how people deal with scarcity?
"The dismal science."
The payment for entrepreneurship is called _______.
Profit.
What shifts the entire PPC outward?
An increase in available resources or new technology.
According to the Law of Supply, when price rises, quantity supplied _______.
Increases.
If both demand and supply increase, what is certain?
Quantity will increase (price is indeterminate).
Explain how the PPC demonstrates increasing opportunity cost.
The bowed-out shape shows more of one good requires sacrificing increasing amounts of the other.
What role does government play in the circular flow model?
Acts as both producer and consumer, while collecting taxes
Why do countries specialize according to comparative advantage?
To produce goods at a lower opportunity cost, leading to mutual trade benefits
List two non-price determinants of demand.
Income, tastes, number of buyers, expectations, related goods (any 2 accepted).
If demand for smartphones rises sharply, what happens to the app market?
Demand for apps shifts right, causing shortages at the old price and higher equilibrium price.