Vocabulary
Individuals, businesses, and governments have unlimited wants, but limited resources.
Scarcity
What is the difference between trade-offs and opportunity cost?
Trade-offs are ALL of the options given up when action is taken. Opportunity cost is the second best alternative.
Use the following table to answer the question:
Sugar (tons) Cars
Cuba 40 10
Mexico 50 100
Which country has the absolute advantage in cars? What about sugar?
Mexico and Mexico
The price of bacon, a compliment to eggs, increases. What happens to eggs?
The demand for eggs decreases.
What is the difference between positive and normative statements?
Positive are fact based and can be tested, normative are opinion based.
The Factors of Production are:
Land, labor, capital and entrepreneurship
What are the differences between inefficient, efficient and unattainable?
Inefficient falls inside the curve, efficient is on the curve, unattainable is outside the curve.
Use the following table to answer the question:
Sugar (tons) Cars
Cuba 40 10
Mexico 50 100
What is Cuba's opportunity cost for producing 1 car?
1 car costs 4 sugar
The supply of eggs, a substitute for cereal, increases. What happens to cereal?
The demand for cereal decreases. If the supply of eggs increases, price goes down, making the demand for cereal lower.
Constant opportunity cost happens when the same resources are used for producing two different things. Increasing opportunity cost happens when two things are being produced that use different resources.
Goods that make consumer goods are
capital goods
Create a PPC from the following chart:
A B C D E
Capital Goods 0 1 2 3 4
Consumer Goods 30 29 25 15 0
Calculate the following opportunity costs:
1. A to B
2. B to C
3. E to D
4. C to A
1. 1 Consumer good
2. 4 consumer goods
3. 1 capital good
4. 2 capital goods
Use the following table to answer the question:
Sugar (tons) Cars
Cuba 40 10
Mexico 50 100
For both countries to benefit, how much sugar can be traded for each car?
1 car for between 4 and 1/2 sugar.
Supply decreases and demand increases.
What are the differences between normal and inferior goods?
Normal goods, also considered luxury goods, have a demand in a good economy. Inferior goods have a high demand when there is a recession.
A type of capital that uses skills, knowledge, traits and experience to make workers more productive.
Human capital
A country can choose from 2 different combinations, 1 capital good and 29 consumer goods, or 3 capital goods and 15 consumer goods. Which should they choose?
3 capital goods and 15 consumer goods because more capital goods leads to economic growth.
Use the following table to answer the question, the table shows hours it takes to produce one ton of sausage and one ton of computers:
Sausage Computers
Canada 2 6
UK 10 10
Which country has an absolute advantage in sausage? What about computers?
Canada and Canada.
The government puts a price floor on the price of corn.
There is a surplus of corn.
What is the difference between a price floor and a price ceiling?
A price floor says that the price of something can't be below a certain number. A price ceiling says that a price can't go above a certain number.
When the government controls the market by putting a maximum price on a good.
Price ceiling
Draw a PPC with a constant opportunity cost and draw a PPC with an increasing opportunity cost.
Teacher approves or disapproves
Use the following table to answer the question, the table shows hours it takes to produce one ton of sausage and one ton of computers:
Sausage Computers
Canada 2 6
UK 10 10
For both countries to benefit, how many sausages can be traded for each computer?
1 computer for between 1 and 3 sausages.
The government gives a subsidy to corn farmers and a report comes out that says high fructose corn syrup leads to cancer.
Supply increases, demand decreases.
What is the difference between Macroeconomics and Microeconomics?
Macroeconomics focuses on the economy as a whole and looks at government policies and trade as they relate to the economy. Microeconomics focuses more on individual businesses and how they affect the economy.