Unit 1 - Scarcity
The basic economic problem we all deal with is...
Scarcity
What are the 3 basic economic questions?
What to produce, how to produce, for whom to produce?
As prices increase, people buy less of a product. This is known as..
The law of demand
as price decreases, businesses produce less of a product. This is called:
The Law of Supply
Give me two examples of complementary goods
....
What are the four factors of production?
Land, Labor, Capital, and Entrepreneurship
Name the three types of mixed economies we discussed in class.
communism, capitalism, socialism. BONUS: Draw the spectrum of economic systems.
The tendency for consumers to purchase a similar, lower-priced product instead of the more expensive one.
Substitution Effect.
If price of inputs increases, supply will...
Decrease (shift to the left)
A shift to the left does what to supply at every price level.
Decreases supply
The ability to fulfill your needs and wants without any outside assistance is called...
Self-Sufficiency
What type of economic system solely relies on government officials to answer the 3 basic economic questions?
Command / Communism.
What is the main form of communication between producers and consumers in the free-market?
pricing
As more units of a product are consumed (i.e. candy) the satisfaction from each additional unit declines. This is called..
Diminishing Marginal Utility
Non-price determinants impact...
Overall Supply / Demand.
What is the difference between Microeconomics and Macroeconomics?
Micro deals with individuals, businesses, and households (supply and demand). Macro encompasses our entire economy (inflation, GDP, unemployment)
The father of capitalism is..
The founder of communism is..
Adam Smith & Karl Marx
When a change in a good's price has a drastic impact on the amount supplied, the supply is considered to be..
Elastic
If a product has readily available substitutes, it is considered an ______ ______ product.
Elastic Demand
Equlibrium price will decrease. Equilibrium quantity will increase.
Draw & Explain the Production Possibilities Curve
...
In the circular flow model, the role of households and firms depends on what?
Which market they are in. EXTRA POINTS: What are the name of the two markets in the circular flow model?
Price Ceilings lead to
shortages
Price Floors lead to..
Surpluses
What are the five shifters of demand?
Tastes/Preferences
Number of Consumers
Price of Related Goods
Income
Expectations