Economics Basics Quiz

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Questions and Answers

What does opportunity cost refer to?

The total cost of production resources.

The value of the next-best alternative when a decision is made. (correct)

The benefits gained from all alternatives.

The cost of the most expensive alternative.

Which of the following best describes microeconomics?

The study of large-scale economic factors.

The examination of governmental financial policies.

The assessment of global economic trends.

The analysis of individual economic agents and units. (correct)

Which factor of production is NOT included in the definition provided?

Land

Entrepreneurship

Technology (correct)

Labor

What is meant by consumption possibilities?

The endless possibilities of how a consumer can spend their budget. Signup and view all the answers

How is capital defined in the context of production factors?

Man-made goods used to produce other goods and services. Signup and view all the answers

What does macroeconomics primarily focus on?

Performance of economies and large-scale economic factors. Signup and view all the answers

Which of the following is NOT a payment received by owners of land?

Wages Signup and view all the answers

What does the term ‘scarce resources’ refer to in economics?

Resources that are limited in availability aimed at satisfying unlimited wants. Signup and view all the answers

What is the primary problem that scarcity presents in economics?

The necessity to define what to produce from limited resources. Signup and view all the answers

Which economic question concerns the method of production?

How to Produce it? Signup and view all the answers

In the context of basic economics problems, what does 'For Whom to Produce' refer to?

The delivery and distribution of goods to consumers. Signup and view all the answers

What is positive economics primarily concerned with?

Analyzing cause-effect relationships in economic decisions. Signup and view all the answers

How does normative economics differ from positive economics?

Normative economics aims to make value judgments on economic decisions. Signup and view all the answers

What foundational concept is expressed as 'the economy where decisions are based on traditions'?

Traditional Economy Signup and view all the answers

Which step is NOT part of the systematic observation process in economics?

Making normative judgments. Signup and view all the answers

What does scarcity imply about resources, regardless of individual wealth?

Everyone faces limitations on resources. Signup and view all the answers

What is the primary economic problem related to population growth?

Scarcity of resources Signup and view all the answers

How is 'market' defined in economic terms?

A medium of interaction between buyers and sellers Signup and view all the answers

What does 'effective demand' imply?

Demand supported by consumer money and ability to buy Signup and view all the answers

What happens to demand when the price of a product decreases?

Demand increases Signup and view all the answers

Which statement accurately describes income inequality?

The gap in income between the rich and the poor Signup and view all the answers

What can poor quality of infrastructure lead to in an economy?

A decrease in resource availability Signup and view all the answers

Who is attributed to the writing of 'Principles of Political Economy'?

John Stuart Mill Signup and view all the answers

What role does the market price play in transactions?

It influences the purchasing power and buyer-seller interactions Signup and view all the answers

What does a demand schedule specifically illustrate?

Various quantities consumers are willing to buy at different prices. Signup and view all the answers

What is the correct formula for the demand function?

Qd = f(P) Signup and view all the answers

Which concept describes the inverse relationship between price and quantity demanded?

Law of Demand Signup and view all the answers

What does a shift in the demand curve indicate?

A change due to a non-price determinant. Signup and view all the answers

Movement along the supply curve is characterized by which of the following?

Changes in quantity supplied due to price changes. Signup and view all the answers

What does the supply function represent?

The dependence of supply on price and other determinants. Signup and view all the answers

Which of the following causes movement along the demand curve?

Price changes affecting quantity demanded. Signup and view all the answers

What influences a shift in the supply curve?

Non-price determinants of supply. Signup and view all the answers

What defines a command economy?

Centralized decision-making imposed by the government. Signup and view all the answers

Which statement accurately describes Gross National Product (GNP)?

It reflects the value of goods and services produced by a country's citizens, both domestically and abroad. Signup and view all the answers

What is the primary focus of a market economy?

Supply and demand determining production choices. Signup and view all the answers

What does the expenditure approach classify?

Components based on their final end-use expenditure. Signup and view all the answers

Which of the following represents the formula for Gross National Product (GNP)?

GNP = C + I + G + (X - M) Signup and view all the answers

How does Gross Domestic Product (GDP) differ from Gross National Product (GNP)?

GDP focuses only on domestic production within national borders. Signup and view all the answers

What does 'Net Inflow (GDP)' measure?

The inflow from GNP minus outflows like factor payments. Signup and view all the answers

Applied economics is best defined as:

Practical application of theoretical economics to various fields. Signup and view all the answers

Study Notes

Economics

The study of how individuals, governments, firms, and nations make choices in allocating scarce resources to satisfy unlimited wants
Scarcity refers to limited resources and unlimited wants

Opportunity Cost

Refers to the value of the next-best alternative when a decision is made
Represents what is given up
It is important to make wise decisions about how and where to spend resources

Consumption Possibilities

Refer to the different ways a consumer can spend their budget

Producer Possibilities

The producer's perspective has limitations when choosing what and how to produce

Factors of Production

Land: Natural resources, including properties
Labor: Any human effort exerted in production, including manual and professional work
Capital: Man-made goods used to produce other goods and services, including machines, equipment, and buildings
Entrepreneurship: The factor involved in combining resources to produce goods and services

Basic Economic Problems of Society

What to Produce: Determining the goods and services that consumers need, based on their demands
How to Produce: Selecting the proper combination of economic resources
For Whom to Produce: Deciding how goods and services will be delivered or distributed to consumers

Types of Economies

Traditional Economy: Economic decisions are based on traditions and customs passed down through generations
Command Economy: Decision-making is centralized and imposed by the government or a planning committee
Market Economy: Decisions are made based on the forces of supply and demand
Mixed Economy: Combines aspects of capitalism and socialism

Importance of Economics

Understanding the needs of society, including the government
Allocating resources to meet society's needs based on priorities and rational decisions

The Scientific Approach in Economics

Step 1: Formation of a specific hypothesis or intelligent guess
Step 2: Systematic observation and gathering of facts to prove the theory
Step 3: Application of logic to the observed facts
Step 4: Empirical testing to validate the hypothesis
Step 5: Repeating steps 1-4

Types of Economics

Positive Economics: Analyzes the cause-effect and interrelationship among factors and events
Normative Economics: Passes judgment on economic decisions based on their outcome, determining if they conform to desired standards

Measuring the Economy

Gross National Product (GNP): The value of all finished goods and services produced by a country's citizens, both domestically and abroad
Gross Domestic Product (GDP): The value of finished domestic goods and services produced within a country's borders
Expenditure Approach: Classifies GDP components by their end-use expenditure
- GNP = C + I + G + (X – M)
  - C: Household and government consumption
  - I: Investments
  - G: Government expenditures on goods and services
  - X: Exports
  - M: Imports
- Net Inflow (GDP) = Inflow (GNP) – Outflow (Income from abroad)
- Net Inflow (GDP) = -Inflow (Income from abroad) + Outflow (Factor Payments)

Economic Problems in the Philippines

High Poverty Rate: The Philippines has a high poverty rate, meaning many people lack the basic necessities
Unemployment: Many Filipinos are unable to find jobs that match their skills or abilities
Poor Quality of Infrastructure: The Philippines ranks low in infrastructure quality
Income Inequality: There is a significant gap in income between the rich and the poor

Basic Principle of Demand and Supply

A market is where buyers and sellers interact to exchange products
Demand: The amount of a product that consumers are willing and able to purchase at a given price.
Demand Schedule: A list of various quantities consumers are willing to purchase at various prices
Demand Function: An equation that shows the relationship between the quantity demanded and its determinants
Law of Demand: There is an inverse relationship between price and quantity demanded
Movements Along the Demand Curve: Changes in quantity demanded due to price changes
Shifts of the Demand Curve: Changes in demand due to non-price determinants, such as consumer preferences, income, or the price of related goods

Supply

Supply: The amount of a product that producers are willing and able to offer for sale at a given price
Supply Schedule: A list of various quantities that producers are willing to offer for sale at different prices
Supply Function: A formula that shows how supply is affected by various determinants
Law of Supply: There is a direct relationship between price and quantity supplied
Movements Along the Supply Curve: Changes in quantity supplied due to price changes
Shifts of the Supply Curve: Changes in supply due to non-price determinants, such as cost production, technology, number of producers, government policies or taxes, price of related goods, and expectations of future prices

Factors Influencing Supply

Cost Production: The expenses incurred to produce the products

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Description

Test your understanding of key concepts in economics, including scarcity, opportunity cost, and the factors of production. This quiz covers how individuals and societies allocate resources to satisfy their needs and wants. Challenge yourself to apply these fundamental principles effectively.