Unit 1: Introduction to Economics
In this type of economic system, all factors of production are owned and controlled by the government. There is an absence of the profit incentive (i.e. private sector)
What is a planned economy (command economy)?
This principle explains why the quantity demanded of a good falls as its price rises, assuming all else remains constant.
What is the law of demand?
This is the total market value of all final goods and services produced in a country over a specific time period.
What is Gross Domestic Product (GDP)?
This is the concept of meeting present needs without compromising the ability of future generations to meet theirs.
What is sustainability?
This 18th-century economist is often called the "father of modern economics" for his work on free markets. Devised the theory of the 'invisible hand' to advocate for minimal government intervention.
Who is Adam Smith?
This model demonstrates the trade-offs and opportunity costs an economy faces
What is the Production Possibilities Curve (PPC)?
This concept measures how responsive the quantity demanded of a good is following a change in price.
What is price elasticity of demand (PED)?
A graphical representation showing the economy's short-term fluctuations and long-term growth trend.
What is the business cycle?
This refers to the ability of a country to produce more of a good using the same resources compared to another country.
What is absolute advantage?
This principle in economics states that every choice involves a trade-off and that the cost of a decision is the value of the next best alternative forgone.
What is opportunity cost?
This type of economic system relies on market forces with minimal government intervention.
What is a free market economy?
This is the result when marginal social cost equals marginal social benefit in a market.
What is allocative efficiency?
This policy involves the Central Bank adjusting interest rates and the money supply to influence aggregate demand and thus inflationary pressure.
What is monetary policy?
This form of trade protection involves taxes placed on imported goods to make them more expensive
What are tariffs?
This concept refers to the inability of a market to allocate resources efficiently, often leading to outcomes that do not maximize societal welfare
What is market failure?
The assumption that all other variables remain constant when analyzing economic models.
What is ceteris paribus?
A government-imposed minimum price above equilibrium creates this type of surplus
What is excess supply?
These policies aim to increase the productive capacity of the economy through investments in human capital and infrastructure.
What is supply-side policy?
This policy provides financial assistance to domestic producers to make them more competitive internationally.
What is a subsidy?
This type of good is non-rivalrous and non-excludable, leading to the "free rider" problem. Thus the government must fund and provide these types of goods as a free market will not.
What is a public good?
This economic model illustrates the flow of goods, services, and money between households and firms
What is the circular flow of income model?
This term describes unintended consequences of economic decisions on third parties
What are externalities?
This term refers to a prolonged period of stagnant economic growth combined with high unemployment and persistent inflation. Often caused by an external shock such as a pandemic or natural disaster.
What is stagflation?
This refers to the reduction in total economic surplus caused by a tariff, resulting from higher prices, reduced consumption, and inefficient resource allocation
What is (deadweight) welfare loss?
This principle in economics explains that consumption of additional units of a good provides less added satisfaction than the previous ones.
The law of diminishing marginal utility?