Microeconomics
Is gasoline an elastic or inelastic good?
Inelastic (People need it for transportation so they buy it even if the price rises)
What are the two types of price controls?
Price ceilings & price floors
True/False: The smartphone industry is considered an oligopoly
True
Define inflation in one short sentence
The sustained increase in the cost of goods and services over time
What does GDP stand for?
Gross Domestic Product
What measures how much the quantity demanded of a product changes when its price changes?
Price Elasticity of Demand (PED)
Price _____ are used by countries with high inflation, such as Venezuela, which has imposed price controls on essential consumer goods like food, medicine, and toilet paper.
The _____ matrix refers to a table that contains the options that are available to players of a game
Payoff
_______ refers to the amount of physical goods and services that can be bought by a given amount of money
Purchasing power
What is the law of supply?
As the price of a good increases, the quantity supplied increases.
Value is driven by relative ______ and the additional _____ a good provides
scarcity, satisfaction
An _____ refers to when the production or consumption of a specific good or service impacts a third party that is not directly related to the production or consumption of that good or service
What is the strategy that always provides the best outcome for a player, no matter what the other players do?
Dominant strategy
What is the main way inflation is measured?
Consumer Price Index (CPI) - Measured by tracking the prices of commonly purchased items
The economy of the Weimar Republic in Germany (1921) is an example of _______
What is known as the satisfaction or happiness people get from consuming a good or service?
Utility
What government intervention increases consumption of goods with positive externalities by lowering costs?
Subsidies
In an ______, a few firms dominate the market, creating ________ where each firm's decisions affect the others
Oligopoly, interdependence
Name one famous historical example of a bubble and provide a short description about it
Tulip Mania (1630s) → Tulip prices soared due to speculation, then crashed overnight
Dot-com Bubble (1990s-2000s) → Overhyped internet companies saw stock prices surge before a market crash
2008 Housing Bubble → Easy credit and risky mortgages led to a housing market collapse and financial crisis
What is "crowding out" in economics?
When increased government spending leads to a reduction in private sector investment
Describe the Law of Diminishing Marginal Utility in one sentence
As consumption of a good increases, the additional satisfaction (marginal utility) derived from each unit decreases
Describe the Tragedy of the Commons in one sentence
The idea that common goods that everyone has access to are often misused and exploited
Describe what collusion is in one sentence
Firms work together to set prices and limit competition, often leading to higher profits
Name one cause and one type of inflation
Causes include demand-pull inflation, cost-push inflation, and built-in inflation.
Types include creeping inflation, galloping inflation, and hyperinflation
What is "stagflation"?
A situation where the economy experiences high inflation and high unemployment simultaneously