14 Questions
What is the concept that countries use to trade goods with each other?
Comparative Advantage
What does an exchange rate determine?
The value of one country's currency compared to another's
What happens to the price of apples if there's a big harvest and the supply increases?
The price of apples will decrease
What is the opportunity cost of buying a video game?
The book you didn't buy
What happens to prices if the inflation rate is 2%?
Prices will increase by 2%
What is the total value of all goods and services produced in a country?
GDP
What is the fundamental problem that leads to opportunity cost?
Limited resources and unlimited wants
What happens to the demand for a product when its price decreases?
Demand increases
What does the price elasticity of demand measure?
How much the quantity demanded changes when the price changes
Which market structure is characterized by a single business controlling the market?
Monopoly
What is the term for the total value of all goods and services produced in a country?
National Income
What is the primary goal of monetary policy?
To control inflation
What is the term for an increase in a country's production and wealth over time?
Economic Growth
What is the term for the study of how individuals make decisions to spend their money?
Consumer Behavior
Study Notes
Basic Concepts
- Scarcity refers to the limited availability of resources (e.g., money, time, materials) and unlimited wants, forcing individuals to make choices.
- Opportunity Cost is the value of the next best alternative that is given up when a choice is made.
Supply and Demand
- Demand refers to the quantity of a product that consumers are willing to buy at different prices, typically increasing when prices drop.
- Supply refers to the quantity of a product that businesses are willing to sell at different prices, typically increasing when prices rise.
- Equilibrium is the point at which the quantity demanded equals the quantity supplied, resulting in a stable market price.
Elasticity
- Price Elasticity of Demand measures the responsiveness of demand to changes in price, with high elasticity indicating a significant change in demand in response to a small price change.
Microeconomics
- Consumer Behavior studies how individuals make spending decisions.
- Production and Costs involves businesses minimizing costs to maximize profits, considering both short-term (variable costs) and long-term (fixed costs) factors.
- Market Structures include:
- Perfect Competition: many firms selling identical products
- Monopoly: one firm controlling the market
- Oligopoly: a few firms dominating the market
- Monopolistic Competition: many firms selling similar but not identical products
Macroeconomics
- National Income (GDP) is the total value of all goods and services produced in a country, measuring economic health.
- Unemployment refers to individuals who want to work but cannot find jobs, with high unemployment negatively affecting the economy.
- Inflation is a sustained increase in prices over time, with moderate inflation being normal but high inflation being problematic.
- Economic Growth is an increase in a country's production and wealth over time.
Policies
- Monetary Policy involves central banks managing the money supply and interest rates to control inflation and stabilize the economy.
- Fiscal Policy involves government spending and taxation to influence the economy, such as cutting taxes to increase spending.
International Economics
- Trade involves countries exchanging goods based on comparative advantage, where each country produces what it's best at.
- Exchange Rates affect trade by changing the cost of goods from different countries, as the value of one country's currency is compared to another's.
Test your understanding of basic economic principles, including scarcity, opportunity cost, supply, and demand.
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