Scarcity and Choice
What is economics the study of?
Scarcity and choice
How to represent increased economic output due to technology on a PPC graph?
Curve shifts outward
What is comparative advantage?
The advantage held by an individual if their opportunity cost of producing a good or service is lowest among the people who could produce that good or service
What is the law of demand?
A higher price for a good will lead to a lower demand.
What is the slope of the supply curve?
positive
What is a “household”?
A person or group of people who share their income.
What do the X and Y axis represent on the PPC graph?
Capital vs consumer goods
What is absolute advantage?
The advantage held by an individual when producing a good or service if they can produce more with a given amount of time and resources
What is the law of supply?
The price of a good and its supply are positively related.
What is the slope of the demand curve?
negative
What are all the factors of production?
Land, labor, capital, and entrepreneurship.
How does the PPC connect to opportunity cost?
our opportunity cost to produce a good is demonstrated by dividing the X and Y of the graph
What is the word that indicates the rate at which one good can be exchanged for another?
Terms of trade
What are all the determinants of demand?
Changes in: tastes, prices of related goods or services, income, number of consumers, and expectations
What happens to the price level and GDP when two curves shift at the same time?
The change is ambiguous
What is the term used to describe the way the economy should work?
Normative economics
How to represent perfectly efficient economic conditions on a PPC graph?
Point is on the line
What effect does specialization have on comparative advantage and absolute advantage?
Specialization promotes the increase of both comparative and absolute advantage
What are all the determinants of supply?
Changes in: input prices, the prices of related goods and services, producer expectations, number of producers and technology.
How is a surplus represented on a demand/supply graph?
Demand is lower than equilibrium, supply is higher than equilibrium.
What are some examples of economic aggregates?
Unemployment rate, inflation rate, gdp
How can a relative opportunity cost help us analyze comparative advantages?
Lower relative opportunity cost means a comparative advantage in producing a good
Why does a country that holds an absolute advantage in two goods still decide to trade?
The country can specialize in producing the good with the lower opportunity cost, and trade for the other
Why does demand and supply work in the modern world?
People respond to incentives
How is a shortage represented on a demand/supply graph?
Demand is higher than equilibrium, supply is lower than equilibrium