Economics Fundamentals

12 Questions

What is the fundamental economic problem that arises due to unlimited wants and needs, but limited resources?

Scarcity

What is the primary difference between absolute advantage and comparative advantage?

Absolute advantage focuses on efficiency, while comparative advantage focuses on opportunity cost.

What is the term for the value of the next best alternative given up when a choice is made?

Opportunity Cost

What is the primary purpose of imposing tariffs on imported goods?

To protect domestic industries

What is the term for the point at which the quantity demanded equals the quantity supplied?

Market Equilibrium

Which economic system is characterized by a combination of market and command economy elements?

Mixed Economy

What is the term for a market structure in which there is a single firm, barriers to entry, and a unique product?

Monopoly

What is the primary benefit of international trade?

Increased efficiency and variety of goods and services

What is the term for an increase in the production of goods and services in an economy over time?

Economic Growth

What is the primary characteristic of a command economy?

Government allocation of resources

What is the term for the actions of a central bank to control the money supply and interest rates?

Monetary Policy

Which economic system is characterized by state or worker ownership of the means of production?

Socialism

Study Notes

Microeconomics

Scarcity: The fundamental economic problem of unlimited wants and needs, but limited resources.
Opportunity Cost: The value of the next best alternative given up when a choice is made.
Law of Demand: As the price of a good increases, the quantity demanded decreases, ceteris paribus.
Law of Supply: As the price of a good increases, the quantity supplied increases, ceteris paribus.
Market Equilibrium: The point at which the quantity demanded equals the quantity supplied.
Types of Markets:
- Perfect Competition: Many firms, free entry and exit, identical products.
- Monopoly: Single firm, barriers to entry, unique product.
- Monopolistic Competition: Many firms, free entry and exit, differentiated products.
- Oligopoly: Few firms, interdependent decision-making, non-price competition.

Macroeconomics

Gross Domestic Product (GDP): The total value of goods and services produced within a country's borders.
Economic Growth: An increase in the production of goods and services in an economy over time.
Inflation: A sustained increase in the general price level of goods and services in an economy.
Unemployment: The number of people able and willing to work, but unable to find employment.
Fiscal Policy: The use of government spending and taxation to influence the overall level of economic activity.
Monetary Policy: The actions of a central bank to control the money supply and interest rates.

International Trade

Absolute Advantage: A country has an absolute advantage in producing a good if it can produce it more efficiently than another country.
Comparative Advantage: A country has a comparative advantage in producing a good if it has a lower opportunity cost than another country.
Gains from Trade: The benefits of trade, including increased efficiency and variety of goods and services.
Tariffs: Taxes imposed on imported goods.
Trade Barriers: Restrictions on international trade, including tariffs, quotas, and subsidies.

Economic Systems

Market Economy: An economy in which resources are allocated based on market forces.
Command Economy: An economy in which resources are allocated by the government.
Mixed Economy: An economy that combines elements of market and command economies.
Socialism: An economic system in which the means of production are owned and controlled by the state or by the workers themselves.
Capitalism: An economic system in which the means of production are owned and controlled by private individuals and businesses.