Terminology
What is scarcity?
Unlimited wants but not enough resources
What does the PPC show?
PPC shows maximum combinations of two goods with given resources
State the law of demand
Price ↑ → Quantity demanded ↓
When does equilibrium occur?
demand = supply
What is a market failure?
Market does not allocate resources efficiently
Define opportunity cost
What you give up when you choose something else
What is a point inside the PPC?
Point inside PPC = Underutilization / inefficient use of resources
State the law of supply
Price ↑ → Quantity supplied ↑
What happens if price is too high?
Price too high → Surplus
Example of negative externality
pollution
What are incentives?
Rewards or penalties that influence behavior
What is the circular flow model?
Shows movement of money and resources between households and firms
What causes movement along demand curve?
Caused by change in price
What happens if demand increases?
Price ↑, Quantity ↑
Example of positive externality
education
Define externalities
Effects of production/consumption on third parties
What is equilibrium?
Where quantity demanded = quantity supplied
Name 3 non-price determinants of demand
What happens if supply decreases?
Price ↑, Quantity ↓
What is a subsidy?
Government payment to encourage production/consumption
Difference between public goods & private goods
Public goods = non-excludable & non-rivalrous Private goods = excludable & rivalrous
Explain surplus vs shortage
👉 Surplus = Supply > Demand
👉 Shortage = Demand > Supply
What shifts supply left?
Explain how equilibrium is restored
How can government reduce plastic waste?