Current Events & Applications
What recent event has affected global supply chains, leading to shortages and higher prices?
Covid-19 Pandemic
What is market equilibrium?
The point where quantity demanded equals quantity supplied.
What characterizes a perfectly competitive market?
Many firms, identical products, and no barriers to entry.
What is the purpose of a price ceiling?
To keep prices below the market equilibrium, making goods more affordable (e.g., rent control).
What does the elasticity of demand measure?
How responsive the quantity demanded of a good is to a change in its price.
Give an example of a government intervention used during an economic crisis.
Stimulus packages, subsidies for businesses, or unemployment benefits during the 2020 pandemic.
What happens to the equilibrium price if supply decreases and demand remains constant?
What is a Monopoly?
A market with one producer dominating the industry with no close substitutes.
What happens when a government imposes a price floor?
It sets a minimum price, leading to surplus if set above equilibrium (e.g., minimum wage).
What is inelastic demand?
When a change in price results in a change in quantity demanded (necessities like insulin).
What role does elasticity play in setting prices for goods during inflationary periods?
Elastic goods may see a drop in demand with rising prices, while inelastic goods maintain demand.
What is the law of demand?
As the price of a good decreases, the quantity demanded increases, and vice versa.
Name an example of an oligopoly.
Automobile manufacturers, airlines, or telecommunication companies.
Give an example of a public good.
National defense, street lighting.
What is opportunity cost?
The value of the next best alternative when a choice is made.
What are potential consequences of tariffs on China and/or Canada?
These trade policies, proposed by President Trump on imports from China and Canada, could lead to higher consumer prices, disrupted supply chains, and market uncertainty.
What is the difference between a movement along the demand curve and a shift in the demand curve?
A movement is due to a price change; a shift happens due to external factors like income changes or preferences.
What differentiates monopolistic competition from perfect competition?
Firms sell similar but differentiated products and have some pricing power.
What is a negative externality?
A cost suffered by a third party due to an economic transaction, such as pollution from a factory.
What causes a shift in the Production Possibilities Frontier (PPF)?
Changes in resources, technology, or external factors like trade.
How do governments typically intervene during high inflation periods?
By raising interest rates, cutting public spending, or imposing price controls.
Explain what happens to the demand for a good when its substitute's price rises.
The demand for the original good increases because consumers switch to the cheaper alternative.
How do firms in an oligopoly behave strategically?
They consider the actions of rival firms when making decisions, often leading to collusion or price leadership.
What is a real world example of a price ceiling/floor?
Up to student discretion
What does the Production Possibilities Frontier (PPF) represent?
It shows the maximum possible output combinations of two goods or services that an economy can produce, given resources and technology.