Market Participants
Name the four types of market participants.
Consumers, producers, government, foreign sector
What is the value of the next best alternative given up to obtain something else?
The value of the next best alternative given up to obtain something else.
Name three components of a free market economy.
Private property, competition, voluntary exchange
What is a pure command economy?
An economic system in which the government controls all aspects of production and distribution.
State the law of demand.
As the price of a good increases, the quantity demanded decreases, all other things being equal.
These individuals purchase goods and services for personal use.
Consumers
If you choose to go to a movie, what is the opportunity cost?
The value of the best alternative activity you could have done instead (e.g., studying, spending time with friends).
What is the role of competition in a free market economy?
Competition encourages businesses to produce high-quality goods and services at lower prices.
Give an example of a country with a pure command economy.
Cuba, North Korea, former Soviet Union
What is the relationship between price and quantity demanded according to the law of demand?
There is an inverse relationship between price and quantity demanded.
These entities create and sell goods and services.
Producers
True or False: Opportunity cost is the total cost of a decision.
False
True or False: A pure command economy is characterized by private ownership and competition.
False
How does a command economy allocate resources?
Government planners make decisions about what to produce, how to produce it, and who gets the goods and services.
Name three factors that can cause a change in demand for a good.
Price of the good, income of consumers, prices of related goods, tastes and preferences, expectations of future prices.
This governing body regulates economic activity and provides public goods and services.
Government
Explain the concept of opportunity cost with an example.
If you choose to spend $20 on a new video game, the opportunity cost is the $20 you could have spent on other things, like food or clothes.
How does voluntary exchange benefit both buyers and sellers in a free market?
Voluntary exchange allows buyers and sellers to trade goods and services based on mutual agreement, leading to mutually beneficial outcomes.
What are some advantages and disadvantages of a command economy?
Advantages: Low unemployment, reduced inequality, public goods. Disadvantages: Inefficiency, lack of innovation, limited consumer choice.
What is the term for the responsiveness of quantity demanded to a change in price?
Price elasticity of demand
These entities outside the domestic economy trade goods and services with the domestic economy.
Foreign sector
How does opportunity cost affect decision-making?
Opportunity cost helps individuals and businesses make rational decisions by weighing the benefits and costs of different choices.
What are some advantages and disadvantages of a free market economy?
Advantages: Economic efficiency, consumer choice, economic growth. Disadvantages: Income inequality, market failures, public goods.
How does a command economy differ from a free market economy?
In a command economy, the government makes economic decisions, while in a free market economy, individuals and businesses make economic decisions.
Explain the concept of elasticity of demand and give an example.
Elasticity of demand measures the responsiveness of quantity demanded to a change in price. For example, the demand for luxury goods is more elastic than the demand for necessities.