Vocab
Wants exceed resources.
Scarcity
3 economic questions
What to produce
How to produce
For whom to produce for
State what happens to the demand curve of music downloads if the price of iPods falls.
Demand Shifts Right
Equations for input and output problems.
Input: a/b
Output: b/a
One nation (individual/company) can produce a good at a lower opportunity cost than the other.
Comparative Advantage
Characteristics of Market Economy
People/businesses in charge, buyers and sellers can meet to complete exchanges, and dollar forces decisions.
What would a decrease in the prices of materials to build computers do to the AS/AD graph.
Shift AS right.
Shreya and Nora have the same resources and time. Shreya can either produce 100 bananas or 20 cherries, and Nora can either produce 120 bananas or 20 cherries. Who has the absolute advantage in each goods?
Bananas - Nora
Cherries - None
A group of buyers and sellers of a particular product.
Market
Characteristics of Command Economy
Central authority makes decisions and determines needs and wants
State what happens to the demand curve for Windows computer when the price of Apple computers goes down.
Demand shifts left
Using the same amount of time and resources, Raj can either write 200 lines of code or process 20 reports, and Angela can either write 220 lines of code or process 20 reports. Who has the comparative advantage in each?
Code - Angelina
Reports - Raj
The amount of a good that buyers are willing and able to purchase at a given price.
Quantity Demanded
Characteristics of Traditional Economy
Allocation of resources determined by ritual and custom, people not free to make decisions based on wants, roles defined by customs from ancestors
State how changes in price level of a good affect the demand curve on an AS/AD graph of that good.
Price level does not shift the demand curve, instead it moves the point along the curve.
Using the same amount of time and resources, Jake can make 5 cakes or 10 muffins and Leah can either write 7 cakes or 8 muffins. What are the appropriate terms of trade that they both will benefit from?
1 cake for 1.5 muffins
The amount that sellers are willing and able to sell.
Quantity Supplied
Components of Capitalist Ideology (name at least 3)
Private property, freedom of enterprise & choice, role of self interest, competition, markets & prices, limited government interaction, use of capital goods, division of labor, use of money as a medium of exchange, and specialization of tasks.
State the effect on Real GDP on an AS/AD graph of chicken if the price of chicken went down.
RGDP will increase.
What is true if two countries specialize in their individual comparative advantages and engage in trade?
Both countries can consume beyond their production possibilities.