ECONOMICS GRAB BAG
Land
Labor
Capital
Entrepreneurship
People in economies respond to what?
Incentives.
What are the two types of efficiency economists are concerned about with production?
Production efficiency - goods and services produced at their lowest resource (opportunity cost)
Allocative Efficiency - mix of goods and services produced is what society desires.
The Law of Demand states _________ .
Demand is inversely related to price
The Law of Supply states __________ .
Supply is positively related to price.
Economics is the study of what?
Rational people think how?
At the margin
The economic principle that states the cost of producing additional units of a good increases as resources are reallocated is known as what?
Principle of Increasing Opportunity Cost
If an economy suddenly experiences an increase in the overall number of buyers, what will the impact be to the demand curve?
Shift to the right
The rise of AI has radically shaped American business. Technological advancements have increased productivity 6% over last year. What impact will this have (if any) on supply?
Shift to the right
New technology lower cost of production
John Maynard Keynes
Where does the government get its money? Name the three sources.
Taxes
Print it
Borrow it
What are the only 2 means by which a Production Possibilities Curve shifts outward (increases)?
1. Expanding (increased) resources
2. Improved technologies
If the federal government raises taxes across the board for every American, what will the impact be to the demand curve?
Shift to the left
The State of Idaho, refusing the recent trends, leaves its minium wage rate the same while neighboring states all increase the cost of labor 5%. What impact will this have on supply in Idaho?
Shift to the right, lower resource cost
This famous economist is known as the Father of the Classical School of Economics.
Adam Smith
What are the 3 primary roles of government in an economy?
Enforce private property rights
Promote efficiency
Promote equity
Comparative Advantage
Assume the price of cell phone plans increases nation wide by an average of 21% - what impact will this have for the demand of cell phones if any?
Price of complimentary goods
The government intervenes with a PRICE CEILING (price limitation), what is created in the market?
A shortage
The amount of wealth and material comfort available to a person or community is known as?
The Standard of Living
Society faces a short term trade off between which two economic realities?
Unemployment and inflation
What are the two reasons for trade between countries?
Absolute Advantage - producing more of a good/service using the same amount of resources
Comparative Advantage - producing goods/services at a lower opportunity cost than another country
Assume Americans have suffered with high inflation for the last quarter. The economic news/predictions is that this inflation will continue for at least another year. What impact will this have on demand?
Shift to the right
Future expectations that prices will be HIGHER.
The point at which both buyers and sellers are equally (content) or mutually discontent is known as what?
Equililbrium