Economic Decision Making and Scarcity
What is an opportunity cost?
The next best alternative when making a decision
What happens to price when demand increases and supply remains constant?
The price increases
What is the defining characteristic of perfect competition?
Many sellers offering identical products.
What is fiscal policy?
Government use of spending and taxation to influence the economy.
What are the three functions of money?
Medium of exchange, store of value, unit of account
What is the fundamental economic problem?
Scarcity - limited resources and unlimited wants
Define price equilibrium
The price at which quantity demanded equals quantity supplied.
Name one example of a Monopoly?
utilities like electricity
Define progressive tax.
A tax system where higher-income earners pay a higher percentage.
Define subprime mortgage.
a loan given to borrowers with poor credit histories.
Give an example of a trade-off in everyday life.
Skipping the movie to study for an exam
Name one factor that cause cause a shift in the supply curve?
Changes in production costs, technology, taxes, etc.
What is an oligopoly?
A market structure with a few large firms dominating the industry.
What is the purpose of antitrust laws?
What is the Federal Reserve's main tool for influencing the economy?
adjusting interest rates
What is the difference between needs and wants?
Needs are essential for survival, while wants are not.
What is a surplus?
When the quantity supplied exceeds the quantity demanded at a given price.
Describe one advantage of a sole proprietorship.
complete control by the owner
Name one type of public good provided by the government.
national defense
What caused the housing market collapse of 2008?
excessive subprime lending and speculative investments.
Explain how scarcity impacts economic choices.
Forces individuals and societies to prioritize resource allocation.
What is a price ceiling?
a legal maximum for the price of a good or service.
How does monopolistic competition differ from perfect competition?
Products are slightly differentiated in MC
Explain the role of the government in regulating externalities.
Governments can impose taxes or subsidies to correct positive or negative externalities.
Name one key action the Federal Reserve took during the 2008 financial crisis.
lowering interest rates or implementing quantitative easing. Buying back the MBS.