Economics Concepts Quiz

Questions and Answers

What is a positive statement?

Can be tested and validated by collecting data.

What is a normative statement?

Assessed in light of values and opinions.

If current production shifts from consumer goods towards more capital, what is the effect?

Future production possibilities are increased.

What is a capital good?

Provides benefits in the future. Signup and view all the answers

Which country is a good example of a high present rate of investment and a low present rate of consumer goods consumption?

China. Signup and view all the answers

What happens in an imperfect market?

Either buyers, sellers, or both have influence over the prices. Signup and view all the answers

In a market economy, prices adjust so that quantity supplied equals what?

Quantity demanded. Signup and view all the answers

What is market demand?

Sum of individuals' demand. Signup and view all the answers

What is a long run shortage?

Long run quantity demanded - long run quantity supplied. Signup and view all the answers

Why are price floors implemented by the government?

In response to political pressures from suppliers to keep prices high. Signup and view all the answers

Why are price controls necessary?

Goods and services for a normal happy life should be attainable. Signup and view all the answers

How has the international community sought to reduce the negative effects of price floors?

International treaties banned the dumping of surplus production. Signup and view all the answers

If a price ceiling is above equilibrium, it is nonbinding.

True Signup and view all the answers

If a price ceiling is below equilibrium, it is binding and affects the market.

True Signup and view all the answers

After an increase in minimum wage, unemployment is ______ in the long run than the short run.

higher Signup and view all the answers

What are the unintended effects of rent control?

Decreases landlord's profit and makes them not want to keep up the apartment; makes people want to live in houses not apartments. Signup and view all the answers

Rent control units have a -------- ownership turnover rate.

low. Signup and view all the answers

Low income people have an easier time finding somewhere to live in the long term when there's rent control.

False Signup and view all the answers

Why is there a minimum wage when the price ceiling is already non-binding?

It helps low-income voters have hope for a betterment in their situation. Signup and view all the answers

Why is rent control considered an ineffective way to provide housing for low-income people?

The landlords just pass it down from generation to generation. Signup and view all the answers

Study Notes

Economic Statements

Positive statement: Can be tested and validated through data collection.
Normative statement: Judged based on values and opinions.

Production and Capital Goods

Shifting current production from consumer goods to capital goods enhances future production possibilities.
Capital good: Provides benefits or returns in the future.

Investment and Consumer Goods

China: Example of a country with high current investment rates and low current consumption of consumer goods.

Market Dynamics

In an imperfect market, either buyers, sellers, or both can influence prices.
In a market economy, prices adjust until quantity supplied equals quantity demanded.
Market demand is the total sum of individual demands.

Market Shortages and Controls

Long run shortage is calculated as long run quantity demanded minus long run quantity supplied.
Price floors are often implemented due to political pressures from suppliers seeking higher prices.
Price controls exist to ensure goods and services necessary for a comfortable life are accessible.

Price Ceilings and Market Impact

A price ceiling above equilibrium is considered nonbinding and has no effect on the market.
A price ceiling below equilibrium is binding and affects the market dynamics.

Employment and Wages

After an increase in minimum wage, unemployment is generally higher in the long run compared to the short run.

Rent Control Consequences

Unintended effects of rent control include reduced landlord profits, leading to decreased maintenance of apartments and a shift in preference toward houses.
Rent-controlled units exhibit low ownership turnover rates.
Low-income individuals face challenges in securing long-term housing even with rent control in place.

Minimum Wage Context

The existence of a minimum wage, even when a price ceiling is nonbinding, offers low-income voters hope for improving their financial situation.
Ineffectiveness of rent control: Many landlords keep rent-controlled units within families, thus limiting accessible housing options for low-income individuals.

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Description

Test your knowledge on key economic concepts including positive and normative statements, production, investment, market dynamics, and shortages. This quiz explores various aspects of economics and how they influence market behavior.