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Questions and Answers
What is the term for the amount of a commodity available and the desire of buyers for it?
What is a cost that an entity has incurred and cannot recover by any means?
What is the general increase in prices and fall in the purchasing value of money?
What is the metaphor for how self-interested individuals operate in a free market economy?
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What is the economic problem in which every individual tries to reap the greatest benefit from a given resource?
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What is the loss of potential gain from other alternatives when one alternative is chosen?
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What is the ability of an individual or group to carry out a particular economic activity more efficiently than another activity?
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What is the process of summing the benefits of a situation and then subtracting the associated costs?
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What is the term for the concept that describes the regulation of price by the availability of a commodity and the desire of buyers?
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What is the term for the situation where the demand for a resource overwhelms the supply, directly harming others?
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Study Notes
Economic Concepts
- Supply and Demand: a fundamental principle in economics that regulates prices, where the amount of a commodity available meets the desire of buyers for it.
Cost Concepts
- Sunk Cost: a cost incurred by an entity that cannot be recovered by any means, and should not influence future decisions.
- Opportunity Costs: the potential gain lost when choosing one alternative over others, representing a trade-off in decision-making.
Market Dynamics
- Inflation: a sustained increase in prices and a decrease in the purchasing power of money, affecting the economy as a whole.
- Tragedy of the Commons: an economic problem where individual self-interest in a shared resource leads to its depletion, harming others.
Comparative Advantage
- Comparative Advantage: the ability of an individual or group to perform a particular economic activity more efficiently than others, promoting specialization and trade.
Decision-Making Tools
- Cost-Benefit Analysis: a systematic approach to weigh the benefits of a situation or action against its associated costs, facilitating informed decision-making.
Key Figures and Institutions
- Adam Smith: renowned as the Father of Modern Economics, known for his work "The Wealth of Nations" and the concept of the "Invisible Hand".
- Banks: financial establishments that invest deposited money, provide loans, and exchange currency, serving as a backbone of the economy.
- Credit Unions: non-profit cooperatives that allow members to borrow at low interest rates, promoting financial inclusion.
Financial Concepts
- Capital: wealth in the form of money or assets used for starting a business, investing, or other economic pursuits.
- Capital Gains: profits earned from the sale of property or investments, subject to taxation.
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Description
Test your knowledge of essential economics concepts, including supply and demand, sunk costs, inflation, and the invisible hand.
