Economic Review Quiz

Economic Review

• Economic Concepts

  • Demand: The quantity of a good or service that consumers are willing and able to buy at various prices.
  • Law of Diminishing Marginal Utility: As a consumer consumes more of a good, the satisfaction (utility) received from each additional unit declines.
  • Law of Demand: Higher prices lead to lower quantities demanded, and vice-versa.
  • Demand Schedule: A table showing the quantity demanded at different prices.
  • Neutral Good: Demand does not change based on price.
  • Complimentary Good: The demand for one good increases when the price of another good decreases (and vice-versa).
  • Elastic Demand: A significant change in the quantity demanded in response to a change in price.
  • Inelastic Demand: A small change in the quantity demanded in response to a change in price.
  • Tangible Goods: Goods that can be touched or seen.
  • Intangible Goods: Services or experiences.
  • Scarcity: The limited availability of goods and services.
  • Rationing Device: Mechanisms for distributing scarce goods or services.

• Types of Goods

  • Excludable Goods: Consumers can be prevented from consuming the goods.
  • Non-excludable Goods: Consumers cannot be prevented from consuming the goods.
  • Price-takers: Firms that cannot influence market prices.
  • Price-seekers: Firms with some power to influence market prices (e.g., monopolies).

• Market Structures

  • Monopoly: Single seller of a unique product.
  • Perfect Competition: Many sellers of similar products.

• Economic Indicators

  • GDP: Gross Domestic Product—total value of goods and services produced in a country.
  • CPI: Consumer Price Index—measures inflation.

• Labor Market

  • Frictional Unemployment: Workers transitioning between jobs.
  • Structural Unemployment: Workers lacking skills needed for available jobs.
  • Inflation Rate: The rate at which prices increase over time.

• Business Organization Structures

  • Sole Proprietorship: Business owned and run by one individual.
  • Partnership: Business owned and run by multiple individuals.
  • Corporation: A separate legal entity from its owners.

• Economic Motivations

  • Incentive: Factors driving people to take specific actions.

• Macroeconomics

  • Fiscal Policy: Government policies impacting output through spending and taxes.
  • Expansionary Policy: Increased spending and/or lower taxes.
  • Contractionary Policy: Decreased spending and/or increased taxes.
  • Crowding out: Government borrowing reducing private sector investment.

• Economic Issues

  • Stagflation: When inflation occurs with slow economic growth/high unemployment.
  • Supply and Demand Equilibrium: Supply equals demand at a certain price.
  • Federal Reserve: Central bank of the US; monetary policy.
  • Open Market Operations: Buying and selling of bonds to influence the money supply.

Economic History

• Adam Smith is considered a first modern economist

  • First modern economist

• Ethics in economics also a critical factor

• Concepts like land, entrepreneur and capitalists are considered important components of an economy.

• Businesses, production, resources, and methods considered critical elements

• Financial Market and Incentives:

  • Financial markets provide incentives to people to allocate resources efficiently.
  • Incentives influence people's behavior in markets.