Econ Review

Supply & Demand

100

When supply goes down, demand goes UP

What happens to the price? 

The price will go up

200

A local farmer’s market sells strawberries. During strawberry season, the farm produces a large supply of strawberries and the price drops. What happens to demand for strawberries when the price goes down?

Demand usually increases because lower prices make strawberries more affordable to buyers.

300

A new clothing brand launches a limited-edition sneaker, producing only 500 pairs. The sneakers sell out quickly, and many people who wanted to buy them couldn’t. What happens to the price of the sneakers on resale markets, AND why?

The price of the sneakers on resale markets will likely increase because supply is very limited while demand remains high.

400

A new study is released that proves eating avocados significantly improves heart health. How will this news affect the supply and demand of avocados in the market, and what is the likely impact on the price of avocados?

BONUS: What would happen to the price of the avocado based on the available supply?

The news will increase the demand for avocados, while the supply will decrease. This would lead to an increase of price for Avocados

The price would increase for avocados because there is a limited supply available for avocados

500

A city recently implemented rent control, capping the amount landlords can charge for apartments. As a result, the price of renting an apartment is significantly lower than the market rate. How might this policy affect the supply and demand for apartments, and what unintended consequences might arise?

Rent control increases demand for apartments because prices are lower, but it can decrease supply over time as landlords may choose not to rent or invest in maintenance due to reduced profitability. Unintended consequences might include housing shortages, reduced quality of apartments, and the development of informal markets or favoritism in tenant selection.

Factors of Production

100

What are the four main factors of production commonly recognized in economics?

Land, Capital, Labor, Entrepreneurship

200

What are the two different types of capital?

BONUS: What are the differences between the two types of capital

Physical and Human Capital

Human capital involves people's skills and knowledge, while physical capital includes tools and equipment.

300

Which factor of production is primarily responsible for the creation of goods and services through human effort?

A: Land

B:Labor

C: Capital

D: Entrepreneurship 

B: Labor

Labor represents the human effort that is used in the production of goods and services.

It includes both physical and mental work done by individuals to create products or provide services.

Labor is a crucial factor as it directly contributes to the production process through human involvement.

400

In the context of factors of production, which of the following best describes the role of land?

A. It represents the human effort involved in providing goods and services.

B. It consists of all natural resources used in the production process.

C. It includes the tools and machinery utilized for producing goods.

D. It involves the management and decision-making processes in business.

B. It consists of all natural resources used in the production process.

This choice accurately describes land as it encompasses all natural resources, including minerals, water, and agricultural land, that are utilized in the production of goods and services.

500

Entrepreneurship as a factor of production involves which of the following activities?

A. Providing capital investment for machinery and equipment

B. Using physical effort to produce goods

C. Organizing and managing resources to innovate and bring products to market

D. Extracting and utilizing natural resources

C. Organizing and managing resources to innovate and bring products to market

This choice accurately reflects the essence of entrepreneurship, which includes organizing resources, managing teams, and driving innovation to create and deliver new products or services to the market.

Vocab/Scenarios V1

100

What is economics?

Economics is the study of how we choose to allocate our scarce resources

200

What is opportunity cost?

An opportunity cost is all of the lost potential gain from the choices you did not make

300

A local coffee shop has decided to reduce the price of its specialty lattes by 20%. As a result, the shop has noticed an increase in customers' visits. Considering the law of demand, explain how the reduction in price could affect the quantity demanded of specialty lattes.

This would increase the quantity demanded, as more people are willing and able to purchase lattes at a reduced price. Additionally, the perceived value of the lattes compared to their cost likely contributes to more frequent visits to the coffee shop, increasing profits

400

What is Supply AND Demand? (In other words, what is the definition?)

The relationship between how much is available at a certain price, and how much is demanded at that same price.

500

A company is considering expanding its product line and estimates that the expansion will cost $500,000 and generate $600,000 in additional annual revenue. Alternatively, the company could invest the money in upgrading its existing facilities, which would increase revenue by $700,000 each year. What is the TOTAL AMOUNT opportunity cost of expanding the product line instead of upgrading facilities?

Opportunity Cost = Revenue from Upgrading Facilities - Revenue from Expanding Product Line

Opportunity Cost = $700,000 - $600,000

The Opportunity cost is $100,000 to expand the product over upgrading facilities

Vocab/Scenarios V2

100

What is supply?

How much of something you have

200

What is Demand?

How much of your product does the buying public want

300

Imagine that the price of beef has risen significantly due to a supply shortage. As a consequence, more consumers are now buying chicken instead of beef. Illustrate how the substitution effect might influence the demand for chicken and beef in this scenario.

• Demand for Chicken Increases: Consumers switch to chicken as a cheaper alternative, boosting its demand and possibly its price.
• Demand for Beef Decreases: Higher beef prices discourage consumption, reducing the quantity demanded.
• Market Dynamics: The substitution effect causes shifts in demand, leading to price and supply adjustments in both markets as producers and consumers respond to new price levels.

400

A farmer is deciding whether to use a piece of land for growing wheat or for raising cattle. Compare how the choice of utilizing this factor of production (land) would affect the farmer's production outputs and potential market supply.

Wheat:

• Allocating the land to wheat production allows the farmer to grow a specific quantity of wheat, depending on factors like soil quality, weather, and farming techniques.
• Wheat is a seasonal crop, meaning the land's productivity is tied to planting and harvest cycles.
• The farmer can optimize wheat yields by employing modern agricultural techniques, fertilizers, and irrigation systems.

Cattle:

• Using the land for cattle farming allows the farmer to produce beef, milk, or other animal products. The number of cattle raised will depend on the land’s carrying capacity (how much grazing or feed it can support).
• Cattle farming typically has a longer production cycle than wheat, as it takes time for cattle to mature or produce milk.
• Cattle farming contributes to the supply of meat and dairy products, which are in steady demand but often face more volatility due to concerns about sustainability, environmental impact, and market preferences (e.g., trends toward plant-based diets).

500

A manufacturing company is contemplating whether to invest in more advanced machinery (capital) or to hire additional labor. Discuss how the decision regarding factors of production might impact the company's production capacity and efficiency.

Machinery: Advanced machinery often allows for greater output in a shorter time. It can perform tasks faster and more consistently than labor, leading to a significant increase in production capacity. 

• Machinery improves efficiency by automating repetitive tasks, reducing human error, and ensuring uniform quality.
• Initial costs for purchasing and maintaining machinery may be high, but the long-term benefits (e.g., lower per-unit production costs) often justify the investment.

Human Labor: Hiring more workers increases the company's ability to meet demand without requiring large capital investments upfront. However, the increase in production capacity may not be as dramatic as it would be with machinery. 

While additional labor can enhance flexibility (e.g., workers can adapt to complex or custom tasks), human efficiency is generally lower than that of machines for standardized, repetitive processes.