Intro to Economics
John is choosing between a Mars bar and a KitKat. He chooses the KitKat. What is Jack's opportunity cost?
The Mars bar
The supply curve slopes ______
upwards
The demand curve slopes
downwards
What are the five sectors in the circular flow model?
Households, firms, government, overseas, finance
Identify the four market structures.
Perfect competition, monopolistic competition, oligopoly, monopoly
What does the latin phrase 'ceteris parabis' mean?
All other things constant
A movement up along the supply curve will cause...
an expansion in supply
Provide a pair of substitute goods
Various examples
Identify the three leakages in the circular flow model
Taxes, savings and imports
If a government implemented a price floor, what is the effect in the market?
Surplus
What are the three economic questions arising from the economic problem?
What to produce
How to produce
For whom to produce
Describe the law of supply.
As the price rises, supply for a product will rise. This because the product is seen as more profitable, leading to an expansion in supply with a greater number of firms entering the market.
Provide a pair of complement goods.
Various examples
When leakages are equal to injections, then we can say
the economy is at equilibrium
Give 2 examples of industries in a monopoly and monopolistic competition
various answers
What does the PPF show?
The PPF shows production combinations of two goods. Visually represents opportunity cost through the movement between two points of production along the curve.
How will an increase in supply effect equilibrium price and quantity?
Price will decrease and quantity will increase
What are the three reasons behind the law of demand? (ie. why does demand fall when price rises?)
Substitution effect
Income effect
Diminishing marginal utility
What is the full equation for macroeconomic equilibrium (based on the five sector circular flow model)?
S + T + M = I + X + G
Define positive and negative externalities with examples.
Positive externality - social benefit (e.g. less accidents from driver education)
Negative externality - social costs (e.g. pollution from factories)
What is economics?
The study of how scarce resources are allocated in society.
Name three non price factors affecting supply
Any of: cost of production, technology, prices of other goods, number of sellers, expectations of producers
Explain TWO factors that would increase the demand for swimming pools.
Various answers
What is a transfer payment?
Social welfare payments such as age pensions, child care allowances or unemployment benefits)
The excise tax on tobacco is what type of government intervention? What is the effect on the tobacco industry?
Makes production more expensive, resulting in a decrease in supply