ECO 2023 Test 1 Flashcards

Questions and Answers

Which of the following is not a factor of production? (Select one)

A psychiatrist

A bulldozer

Six thousand acres of farmland

$100,000 used to start a new business (correct)

Combinations of output that fall inside the production possibilities curve of an economy represent: (Select all that apply)

Goods that are attainable (correct)

Efficiently produced goods

Goods that are unattainable

The inefficient use of resources (correct)

An entrepreneur: (Select all that apply)

Looks for the latest new products to copy

Takes the risk of earning profits or suffering losses from owning an enterprise (correct)

Innovates (correct)

Makes strategic business decisions that set the course of an enterprise (correct)

Is employed by a big company

The highest-valued alternative that is given up or sacrificed when choosing to produce or consume one good over another is referred to as ______________.

opportunity cost Signup and view all the answers

In free markets, though prices will rise and fall, equilibrium _ and _ will always be achieved.

price and quantity Signup and view all the answers

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.

determinants; price Signup and view all the answers

A change in ___ refers to a movement along the demand curve in response to changes in the price of a good or service.

quantity demanded Signup and view all the answers

What does a change in demand refer to?

A shift of the demand curve leftward or rightward in response to anything other than changes in the price of a good or service. Signup and view all the answers

Choose all of the following that will cause a change in supply rather than a change in quantity supplied: (Select all that apply)

Producer expectations Signup and view all the answers

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 ________.

supply Signup and view all the answers

What is created when a price ceiling is established?

A shortage Signup and view all the answers

What is the result of a price floor?

Creates a surplus Signup and view all the answers

What is the ONLY factor that shifts both supply and demand curves?

A change in expected future price Signup and view all the answers

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.

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.

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!