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Questions and Answers
Which of the following is not a factor of production? (Select one)
Which of the following is not a factor of production? (Select one)
Combinations of output that fall inside the production possibilities curve of an economy represent: (Select all that apply)
Combinations of output that fall inside the production possibilities curve of an economy represent: (Select all that apply)
An entrepreneur: (Select all that apply)
An entrepreneur: (Select all that apply)
The highest-valued alternative that is given up or sacrificed when choosing to produce or consume one good over another is referred to as ______________.
The highest-valued alternative that is given up or sacrificed when choosing to produce or consume one good over another is referred to as ______________.
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In free markets, though prices will rise and fall, equilibrium ___ and ___ will always be achieved.
In free markets, though prices will rise and fall, equilibrium ___ and ___ will always be achieved.
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The ____ of supply are any factors other than the product's ____ that have an effect on the supply of a good or service and cause the supply curve to shift.
The ____ of supply are any factors other than the product's ____ that have an effect on the supply of a good or service and cause the supply curve to shift.
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A change in ___ refers to a movement along the demand curve in response to changes in the price of a good or service.
A change in ___ refers to a movement along the demand curve in response to changes in the price of a good or service.
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What does a change in demand refer to?
What does a change in demand refer to?
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Choose all of the following that will cause a change in supply rather than a change in quantity supplied: (Select all that apply)
Choose all of the following that will cause a change in supply rather than a change in quantity supplied: (Select all that apply)
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The ability and willingness to sell specific quantities of a good at alternative prices in a given time period, ceteris paribus, is the definition of market ________.
The ability and willingness to sell specific quantities of a good at alternative prices in a given time period, ceteris paribus, is the definition of market ________.
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What is created when a price ceiling is established?
What is created when a price ceiling is established?
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What is the result of a price floor?
What is the result of a price floor?
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What is the ONLY factor that shifts both supply and demand curves?
What is the ONLY factor that shifts both supply and demand curves?
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Study Notes
Factors of Production
- Defined as land, labor, capital, and entrepreneurship.
- Money does not qualify as a factor of production; rather, it facilitates transactions.
- Examples include a psychiatrist (labor), bulldozer (capital), and farmland (land).
Production Possibilities Curve
- Points inside the curve indicate attainable and inefficient use of resources.
Role of Entrepreneurs
- Innovates and takes risks associated with profits and losses.
- Makes strategic decisions for their enterprises.
Opportunity Cost
- Refers to the highest-valued alternative forgone when making choices in production or consumption.
Market Equilibrium
- Prices and quantity always reach equilibrium in free markets, despite fluctuations.
Supply Determinants
- Factors other than price that shift the supply curve.
- Includes costs, technology, number of suppliers, and state of nature.
Quantity Demanded
- A shift along the demand curve occurs due to price changes.
Change in Demand
- Refers to a shift of the entire demand curve, influenced by factors other than price.
Supply Changes
- Influenced by producer expectations, number of sellers, and technology; these factors result in shifts rather than movements along the supply curve.
Market Supply
- Defined as the ability and willingness to sell specific quantities of goods at various prices.
Shortages and Surpluses
- Shortage arises when quantity demanded exceeds quantity supplied.
- Price ceilings create shortages; price floors create surpluses.
Price Expectations
- A change in expected future price can shift both supply and demand curves.
Costs and Supply
- An increase in costs results in a left shift of supply; a decrease leads to a right shift.
Technology Impact on Supply
- Technological advances increase supply, while retreats reduce it.
Impact of Number of Suppliers
- An increase in suppliers shifts supply to the right; a decrease shifts it to the left.
State of Nature
- Good environmental conditions enhance supply; adverse conditions (like natural disasters) reduce it.
Prices of Related Goods
- An increase in the price of complements decreases supply; an increase in the price of substitutes decreases supply.
Expected Future Price
- If future prices are expected to rise, current supply decreases; if expected to fall, supply increases.
Factors of Demand: Income
- Normal goods see an increase in demand with increased income and a decrease with decreased income.
- Inferior goods have the opposite relationship with income changes.
Prices of Related Goods in Demand
- Substitutes: Increase in the price leads to increased demand; decrease leads to decreased demand.
- Complements: Increase in price results in decreased demand; decrease leads to increased demand.
Preferences and Demand
- Positive changes in consumer preferences result in increased demand; negative changes decrease demand.
Number of Demanders
- An increase in the number of buyers boosts demand; a decrease reduces demand.
Ease of Credit
- Easier credit availability increases demand; harder credit conditions decrease demand.
Expected Future Prices in Demand
- An increase in expected future prices boosts current demand; a decrease reduces it.
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Description
Prepare for your ECO 2023 Test 1 with these flashcards. This quiz covers key concepts related to the factors of production in economics, helping you differentiate between various economic terms and their definitions. Test your knowledge and get ready for your exam!
