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Questions and Answers
Which situation describes a surplus in the market?
Which situation describes a surplus in the market?
- There is an equal amount of goods produced and consumed.
- The price of a product is set too low, resulting in high demand.
- The quantity demanded exceeds the quantity supplied.
- The price of a product is above equilibrium, causing excess supply. (correct)
In which economy are resources allocated primarily by the government?
In which economy are resources allocated primarily by the government?
- Market economy
- Mixed economy
- Traditional economy
- Command economy (correct)
What best describes scarcity in economic terms?
What best describes scarcity in economic terms?
- When there is too much of a good available in the market.
- A condition where demand is equal to supply.
- The inability to satisfy all human wants with limited resources. (correct)
- When the price of goods is set too high for consumers.
How does the law of supply generally operate?
How does the law of supply generally operate?
What is the fundamental economic problem associated with limited resources?
What is the fundamental economic problem associated with limited resources?
Which of the following is NOT considered a factor of production?
Which of the following is NOT considered a factor of production?
What occurs in a market economy regarding resource allocation?
What occurs in a market economy regarding resource allocation?
What describes the law of demand?
What describes the law of demand?
What happens to the demand when income increases in a competitive market?
What happens to the demand when income increases in a competitive market?
How does a price ceiling of ₱1.50 affect a competitive market?
How does a price ceiling of ₱1.50 affect a competitive market?
What effect does a simultaneous decrease in supply and increase in demand have on the equilibrium price?
What effect does a simultaneous decrease in supply and increase in demand have on the equilibrium price?
In a command economy, how is market activity primarily regulated?
In a command economy, how is market activity primarily regulated?
What is the primary difference between a shortage and scarcity?
What is the primary difference between a shortage and scarcity?
What is the primary study focus of economics?
What is the primary study focus of economics?
What would be the likely impact on the rental market if a price floor is set at ₱3.50?
What would be the likely impact on the rental market if a price floor is set at ₱3.50?
What does opportunity cost refer to in economic decision making?
What does opportunity cost refer to in economic decision making?
How does an increase in demand for sake influenced by an earthquake impact the market equilibrium?
How does an increase in demand for sake influenced by an earthquake impact the market equilibrium?
According to the law of demand, what happens to quantity demanded when the price of a good increases?
According to the law of demand, what happens to quantity demanded when the price of a good increases?
What is the implication of the law of demand in a situation where the price of a good increases?
What is the implication of the law of demand in a situation where the price of a good increases?
What does the law of supply indicate about the relationship between price and quantity supplied?
What does the law of supply indicate about the relationship between price and quantity supplied?
What differentiates scarcity from shortage in economic terms?
What differentiates scarcity from shortage in economic terms?
In a command economy, what primarily dictates resource allocation?
In a command economy, what primarily dictates resource allocation?
What condition is described as existing when the quantity supplied exceeds the quantity demanded?
What condition is described as existing when the quantity supplied exceeds the quantity demanded?
How is a shortage fundamentally characterized in economic terms?
How is a shortage fundamentally characterized in economic terms?
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Study Notes
Economic Concepts
- Scarcity: A condition where resources are insufficient to satisfy all wants. A permanent state affecting decision-making.
- Shortage: A temporary situation where demand outstrips supply, often due to price being set too high.
Opportunity Cost
- Defined as the value of the best alternative that is forgone when making a decision, rather than the total cost or amount of money spent.
Laws of Demand and Supply
- Law of Demand: States that as the price of a good rises, the quantity demanded decreases; conversely, as the price drops, demand increases.
- Law of Supply: As the price of a good increases, the quantity supplied increases; when prices drop, supply decreases.
Equilibrium Price
- The point where the quantity demanded equals the quantity supplied. It maximizes producer profits while satisfying consumer demand.
Market Economy vs. Command Economy
- Market Economy: Resource allocation is determined by market forces without government intervention.
- Command Economy: The government controls resource allocation and economic decisions.
Economic Problems
- Scarcity is the most fundamental economic problem, defining the limits of how resources can be utilized.
Shifts in Supply and Demand
- Simultaneous shifts can occur due to events such as natural disasters, affecting both supply and demand.
- Example: An earthquake decreases supply (e.g., fermented rice for sake) while potentially increasing demand for related products.
Market Responses to Price Controls
- Price Ceiling: A maximum price set below equilibrium, causing shortages as demand exceeds supply.
- Price Floor: A minimum price set above equilibrium, leading to surpluses as supply exceeds demand.
Basic Production Factors
- Key factors of production include land, labor, and capital. Money is not considered a factor of production but a medium of exchange.
Retail Market Dynamics
- Equilibrium adjusts based on fluctuating demand and supply. Changes in income levels can influence both the equilibrium price and quantity in the market.
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