BASIC ECONOMIC IDEAS
This economic problem exists because resources are limited but wants are unlimited.
What is scarcity?
Law stating that as price increases, quantity demanded decreases.
What is the Law of Demand?
Elasticity measures how responsive consumers are to this.
What is price?
A government-imposed minimum price.
What is a price floor?
Buying goods from another country.
What are imports?
The value of the next best alternative you give up when making a decision.
What is opportunity cost?
A change in consumer income, tastes, or population causes this.
What is a shift in demand?
When demand is very responsive to price changes, demand is…
What is elastic?
A government-imposed maximum price.
What is a price ceiling?
Selling goods to another country.
What are exports?
The three basic economic questions every society must answer.
What are: What to produce? How to produce? For whom to produce?
The price at which quantity supplied equals quantity demanded.
What is equilibrium?
Goods like insulin or gasoline tend to have this type of demand.
What is inelastic demand?
A tax placed on producers or consumers to raise government revenue.
What is an excise tax?
The price at which goods are traded internationally.
What is the world price?
This curve shows the maximum combinations of two goods an economy can produce.
What is the production possibilities curve (PPC)?
A situation where quantity demanded is greater than quantity supplied.
What is a shortage?
Elasticity depends on availability of this.
What are substitutes?
Taxes reduce this for both buyers and sellers.
What is consumer and producer surplus?
A tax on imported goods.
What is a tariff?
When resources are not fully used or used inefficiently, the economy is operating…
What is inside the PPC?
A price floor set above equilibrium will cause this.
What is a surplus?
If total revenue increases when price falls, demand is…
What is elastic?
Deadweight loss occurs because taxes discourage this.
What is mutually beneficial trade?
Trade allows countries to specialize based on this principle.
What is comparative advantage?