Economics Key Concepts
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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?

  • Supply and Demand (correct)
  • Tragedy of the Commons
  • Inflation
  • Opportunity Costs
  • What is a cost that an entity has incurred and cannot recover by any means?

  • Invisible Hand
  • Comparative Advantage
  • Sunk Cost (correct)
  • Cost-Benefit Analysis
  • What is the general increase in prices and fall in the purchasing value of money?

  • Supply and Demand
  • Opportunity Costs
  • Inflation (correct)
  • Tragedy of the Commons
  • What is the metaphor for how self-interested individuals operate in a free market economy?

    <p>Invisible Hand</p> Signup and view all the answers

    What is the economic problem in which every individual tries to reap the greatest benefit from a given resource?

    <p>Tragedy of the Commons</p> Signup and view all the answers

    What is the loss of potential gain from other alternatives when one alternative is chosen?

    <p>Opportunity Costs</p> Signup and view all the answers

    What is the ability of an individual or group to carry out a particular economic activity more efficiently than another activity?

    <p>Comparative Advantage</p> Signup and view all the answers

    What is the process of summing the benefits of a situation and then subtracting the associated costs?

    <p>Cost-Benefit Analysis</p> Signup and view all the answers

    What is the term for the concept that describes the regulation of price by the availability of a commodity and the desire of buyers?

    <p>Supply and Demand</p> Signup and view all the answers

    What is the term for the situation where the demand for a resource overwhelms the supply, directly harming others?

    <p>Tragedy of the Commons</p> Signup and view all the answers

    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.

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