Economic Problem
What is scarcity?
Limited resources and unlimited wants
What are the four types of Economic System?
Free Market
Planned Economy
Mixed Economy
Sustainable Economy
What is demand?
Demand is the willingness and ability to pay for a good or service at a given price over a given period.
What is production?
Production is the act of converting inputs into output
What are the three most basic choices all societies must make?
What to produce?
How to produce?
For whom to produce?
Prices are determined in a mixed economy by.....
Consumers and Government
What is another name for conditions of demand?
non-price factors of demand
What are the four periods of production
The momentary or market period
The short-run period
The long-run period
The very long-run period
What are three assumptions that are made when drawing the PPF?
There are only two goods.
Technology is fixed.
No foreign trade exists.
Output is measured on a yearly basis.
The level of resources is fixed.
Output is measured in units.
Resources are perfectly mobile.
Direction satisfaction of wants is provided by a.....
Subsistence economy
What is the formula for Average Utility?
Total utility/ number of units employed
What is 'The law of variable proportions'?
states that as increasing amounts of a variable factor are combined with a fixed amount of a fixed factor returns to the variable factor will initially increase at an increasing rate (law of increasing returns) until they peak and thereafter fall to 0 (law of diminishing returns).
What is Pareto Optimality?
It describes a state of affairs where it is impossible to make any individual better off without making someone else worse off.
Describe a planned economy
A planned economy is an economy that is managed by a central planning committee. There is no role for private enterprise.
What is the cardinalist theory?
The cardinalist theory of demand assumes that satisfaction can be measured by using numbers
Diminishing returns are caused by
Overcrowding of the fixed factor
A combination of output that is inside the PPF indicates:
Productive inefficiency
Which two economies is not influenced by the government?
Planning
Sustainable
What is the law of diminishing marginal utility?
The law of diminishing marginal utility states that ‘as increasing units of a good are consumed, the marginal utility of each additional unit consumed diminishes until it reaches zero’.
In which order do TPP, MPP and APP begin to decrease in short-run production
MPP, APP, TPP