The Basic Economic Problem - Chapters 1 & 2
Do economic goods have opportunity costs?
Yes
What does PPC stand for?
Production Possibility Curve
What are the 3 types of economic systems?
Planned, Free, and Mixed Economic System
What is the definition of Demand?
Demand is the willingness and ability of consumers to buy a good or service at different prices over a period of time.
Fill in the blanks:
Market equilibrium is a condition where _____ and _____ are equal.
Demand and Supply
Which one of these 𝐢𝐬𝐧'𝐭 a factor of production?
a. Capital
b. Technology
c. Land
d. Entrepreneurship
b. Technology
Which one of these would cause a shift to the left in a PPC?
a. Better education & training
b. Increase in labor force
c. Outdated technology or lack of investment.
d. A rise in the retirement age
c. Outdated technology or lack of investment.
1. What goods and services should an economy produce?
2. How should goods and services be produced?
3. Who should get the goods and services produced?
Fill in the blank:
The law of supply states that when price increases supply ____ .
Increases
What's another word for Excess Demand?
Shortage
The payment for capital is profit, True or False?
False
Fill in the blank:
PPCs are usually bowed _____ because the best resources are used first to produce a particular type of product.
Outwards
Name all of the economic agents.
Households, Firms, Government
Fill in the blank:
An _____ in demand can be caused by a rise in the price of a substitute product
Increase
Fill in the blanks:
Changes in demand will cause a change in _____ and a movement along the _____ curve.
What are the 2 key factors that influence the quantity of labour?
1. The number of workers available.
2. The number of hours which they work.
Dave has two job offers. One pays $300,000 per year as a doctor in Germany but requires him to move far from his family. The other pays $150,000 per year at a local hospital and allows him to stay close to home. If Dave chooses the $300,000 job, what is his opportunity cost?
His opportunity cost is the $150,000 salary job in the local hospital and being close to his family.
What type of economic system does Poland have?
A transition economy - Countries that have been moving towards a more market-oriented balance in their economic systems.
Fill in the blanks:
The demand of inferior goods will _____ when income_____ .
Decrease, Increases
If a firm sets the price above the equilibrium level, what will occur?
A surplus (Excess Supply)
What is the formula of net investment?
Formula of Net Investment = Gross investment - depreciation.
What does the word "Frontier" mean in Production Possibility Frontier?
The border or boundary
What are the 4 main areas of study in Macroeconomics?
Growth (increase in the total output), Price level (inflation), Labor markets (unemployment), The balance in the foreign sector (exports/imports, exchange rates)
Explain why an increase in the price of gasoline might decrease the demand for cars but increase the demand for bicycles at the same time.
An increase in gasoline prices makes driving more expensive, so the demand for cars decreases since cars and gasoline are complements. At the same time, bicycles are substitutes for cars, so their demand increases as people switch to cheaper transport.
Increase price -> Reduce demand -> More supply -> Balance at equilibrium.