Economics Overview Quiz
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Questions and Answers

What does positive economics focus on?

  • Value-based judgments
  • Normative statements
  • Objective analysis of economic situations (correct)
  • Subjective interpretations

    • Which of the following represents an example of positive economics?

  • Unemployment rate (correct)
  • A proposal for tax reforms
  • Ideal allocation of resources
  • Suggestions for reducing poverty

    • Which economic branch deals with individual choices based on changes in incentives?

  • Agricultural economics
  • Microeconomics (correct)
  • Normative economics
  • Macroeconomics

    • What is scarcity in economic terms?

    <p>When supply cannot meet demand</p> Signup and view all the answers

    What is a normative statement?

    <p>An assertion that is based on personal values</p> Signup and view all the answers

    What are average variable costs (AVC)?

    <p>Fixed costs divided by the quantity of output</p> Signup and view all the answers

    Which of the following primarily focuses on improving economic development?

    <p>Normative economics</p> Signup and view all the answers

    Which statement best describes good in economic terms?

    <p>A product that satisfies someone's needs or wants</p> Signup and view all the answers

    What does agricultural economics study?

    <p>Production and distribution of agricultural resources</p> Signup and view all the answers

    What does macroeconomics analyze?

    <p>Overall economy behavior</p> Signup and view all the answers

    What does a high number of good substitutes indicate about the price elasticity of demand for a product?

    <p>Demand is elastic.</p> Signup and view all the answers

    When a price increase involves a substantial amount in proportion to the consumer's income, what type of demand is generally observed?

    <p>Elastic demand.</p> Signup and view all the answers

    Which type of goods are likely to have elastic demand according to their importance to consumers?

    <p>Luxury goods.</p> Signup and view all the answers

    What is likely to be the effect of time on supply elasticity?

    <p>Supply elasticity increases with time.</p> Signup and view all the answers

    What does the opportunity cost represent?

    <p>The value or benefit lost when choosing one option over another.</p> Signup and view all the answers

    According to Keynesian Theory, what happens if consuming goods does not increase demand for them?

    <p>It results in a decline in production.</p> Signup and view all the answers

    In the formula for Gross Domestic Product (GDP = C + I + G + (X-M)), what does 'C' represent?

    <p>Consumer spending.</p> Signup and view all the answers

    How is the inflation rate calculated?

    <p>As the percentage change in the price index from the previous period.</p> Signup and view all the answers

    What is the formula to calculate the Consumer Price Index (CPI)?

    <p>CPI = TWP Current / TWP Base Year x 100</p> Signup and view all the answers

    Which type of unemployment is characterized by workers taking time to find jobs that suit their skills?

    <p>Frictional Unemployment</p> Signup and view all the answers

    What does the Inflation Rate (IR) formula measure?

    <p>Percentage change in the Consumer Price Index</p> Signup and view all the answers

    What is defined as the percentage of the labor force that is unemployed?

    <p>Unemployment Rate</p> Signup and view all the answers

    Which theory suggests that economic systems work best with minimal government intervention?

    <p>Laissez-Faire Theory</p> Signup and view all the answers

    How is the Purchasing Power of Peso calculated?

    <p>PPP Year = 100 / CPI of the Year</p> Signup and view all the answers

    Which type of unemployment arises when there aren't enough jobs available in the labor market?

    <p>Structural Unemployment</p> Signup and view all the answers

    What defines the term 'Underemployed' in the labor market?

    <p>Working less than 40 hours a week</p> Signup and view all the answers

    What defines autarky in economic terms?

    <p>A situation where a family group produces goods equal to their consumption</p> Signup and view all the answers

    Which of the following is NOT a characteristic of commodity money?

    <p>Is universally accepted without question</p> Signup and view all the answers

    What is one of the main functions of money?

    <p>A standard of deferred payment</p> Signup and view all the answers

    Which function does the Central Bank of the Philippines NOT perform?

    <p>Acts as a commercial lending bank for individuals</p> Signup and view all the answers

    When was the Central Bank of the Philippines formally opened?

    <p>January 3, 1949</p> Signup and view all the answers

    What does the Electronic Fund Transfer System utilize for transactions?

    <p>Computer terminals for automated transactions</p> Signup and view all the answers

    Which of the following describes the main objective of the Central Bank of the Philippines?

    <p>To maintain price stability of the peso</p> Signup and view all the answers

    What role does the Central Bank of the Philippines serve in the financial system?

    <p>It acts as the lender of last resort</p> Signup and view all the answers

    What does fixed cost refer to in economic terms?

    <p>Costs that do not change with output levels.</p> Signup and view all the answers

    How does the law of demand typically affect quantity demanded?

    <p>Quantity demanded decreases with a price rise.</p> Signup and view all the answers

    What is average total cost (ATC) calculated as?

    <p>Total costs divided by the quantity produced.</p> Signup and view all the answers

    What defines a perfectly elastic demand?

    <p>An infinite change in quantity demanded without any change in price.</p> Signup and view all the answers

    A surplus occurs when:

    <p>The quantity supplied exceeds the quantity demanded.</p> Signup and view all the answers

    What influences elasticity of demand aside from price?

    <p>Tastes and preferences of consumers.</p> Signup and view all the answers

    In the context of equilibrium market, what occurs?

    <p>Demand is equal to supply.</p> Signup and view all the answers

    Which term describes the situation when supply and demand are not equal?

    <p>Disequilibrium.</p> Signup and view all the answers

    What do we call the costs that vary with production output?

    <p>Variable costs.</p> Signup and view all the answers

    How is elasticity of supply defined?

    <p>Responsiveness of quantity supplied to changes in price.</p> Signup and view all the answers

    Study Notes

    Economics

    • Studies scarcity and its implications for resource use, goods and services production, growth, and welfare over time.

    Positive Economics

    • Objective analysis of economic happenings.
    • Uses facts and verifiable data to explain economic events.
    • Investigates past and present economic activity to predict future trends.

    Normative Economics

    • Focuses on value-based judgments to improve economic development, projects, and wealth distribution.
    • Based on opinions and values rather than empirical data.

    Microeconomics

    • Analyzes individual economic actors' choices based on incentives, prices, resources, and production methods.

    Macroeconomics

    • Examines overall economic behavior.

    Agricultural Economics

    • Studies resource allocation, distribution, and utilization in agriculture.

    Cost

    • Monetary value of sacrifices made to achieve an objective.
    • Includes money expenses incurred by a firm during production.

    Fixed Cost

    • Remains constant regardless of output levels (e.g., rent).

    Variable Cost

    • Changes with output levels (e.g., raw materials).

    Total Cost

    • Sum of fixed and variable costs.

    Average Total Costs (ATC)

    • Total cost divided by quantity output.

    Average Fixed Costs (AFC)

    • Fixed cost divided by quantity output.

    Average Variable Costs (AVC)

    • Variable cost divided by quantity output.

    Inventories

    • Unsold goods that make up a firm's stock.

    The Law of Demand

    • Quantity demanded of a good decreases as its price increases, and vice versa (ceteris paribus).

    Factors Influencing Quantity Demanded (Besides Price)

    • Tastes and preferences
    • Income
    • Expectations about future prices
    • Prices of related goods (substitutes)

    Ceteris Paribus

    • All other things remain equal.
    • Assumption of no change in any other variable.

    Shortage

    • Occurs when quantity demanded exceeds quantity supplied.

    The Law of Supply

    • Quantity supplied of a good increases as its price increases, and vice versa (ceteris paribus).

    Factors Influencing Supply (Besides Price)

    • Cost of production
    • Number of firms in the market
    • Availability of economic resources
    • Technology used
    • Government policies

    Equilibrium Market

    • State where demand equals supply.
    • Represents agreement between buyers and sellers on transaction quantities.

    Equilibrium Price

    • The price at which demand and supply are equal.
    • Also known as the "market clearing price".

    Disequilibrium

    • Occurs when supply and demand are not equal.

    Surplus

    • Occurs when quantity supplied exceeds quantity demanded.

    Elasticity of Demand

    • Measures the responsiveness of quantity demanded to changes in market price.

    Elasticity of Demand Categories

    • Elastic Demand: Large percentage change in quantity demanded due to a price change.
    • Inelastic Demand: Small percentage change in quantity demanded due to a price change
    • Unitary Demand: Percentage change in price equals percentage change in quantity demanded.
    • Perfectly Elastic Demand: Infinite change in quantity demanded with no price change (or a very small change).
    • Perfectly Inelastic Demand: No change in quantity demanded despite a price change.

    Elasticity Formula (for Demand):

    • (Qd1 - Qd2) / (Qd1 + Qd2) / (P1 - P2) / (P1 + P2)

    • Where:

      • Q = quantity
      • P = price

    Elasticity Coefficient:

    • Greater than 1: Elastic demand, quantity changes faster than price
    • Equal to 1: Unitary demand
    • Less than 1: Inelastic demand, quantity changes slower than price

    Determinants of Elasticity of Demand

    • Number of substitutes: Products with many substitutes have elastic demand, while those with few substitutes have inelastic demand.
    • Price increase in proportion to income: If a price increase has a small impact on a buyer's budget, demand is inelastic. If the price increase is a significant proportion of income, demand is elastic.
    • Importance of the product to consumers: Luxury goods are elastic, necessities like food are inelastic.

    Elasticity of Supply

    • Measures the responsiveness of quantity supplied to changes in market price.

    Price Elasticity of Supply (PES) Formula:

    • ES = %ΔQs / %ΔP

    • Where:

      • %ΔQS = the percentage change in quantity supplied
      • %ΔP = the percentage change in price

    Determinants of Supply Elasticity:

    • Time: Longer time periods generally allow for greater supply elasticity.
    • Ability to produce substitutes: The availability of substitutes for the product influences supply elasticity.

    Consumption

    • The use of goods and services by households.
    • The act of using resources to satisfy current wants and needs.

    Consumers

    • Individuals who buy or use goods and services to satisfy their wants.
    • The final users of an item.

    Keynesian Theory

    • Suggests that a lack of increased demand for goods and services leads to decreased production.
    • Emphasized government intervention to stimulate demand and economic activity.

    Inflation

    • A sustained increase in the general price level.

    Inflation Rate

    • The percentage change in the price index from the preceding period.

    Consumer Price Index (CPI) Formula:

    • CPI = TWP Current / TWP Base Year x 100

    Total Weighted Price (TWP)

    • Used to calculate the CPI.

    Inflation Rate Formula:

    • IR = (CPI (Current Yr) - CPI (Past Yr) / CPI of the past year) x 100

    Purchasing Power of Peso:

    • PPP (Year) = 100 / CPI of the Year

    Labor Force

    • The portion of the population aged 15 or older, willing to work.

    Unemployed

    • Individuals aged 15 or older, willing to work, and able to work but unable to find a job.

    Underemployed

    • Workers who are employed for less than 40 hours per week and are seeking more work.

    Visible Underemployment

    • The number of individuals working less than 40 hours per week and looking for more work.

    Unemployment Rate

    • The percentage of the labor force that is unemployed.

    Types of Unemployment

    • Frictional Unemployment: Occurs when workers are temporarily unemployed while searching for better job matches.
    • Structural Unemployment: Results from a mismatch between the available jobs and the skills of the workforce.

    The Laissez-Faire Theory

    • Advocates for minimal government intervention in the economy, believing that markets will self-regulate.

    Malthusian Theory

    • Suggests that population growth outpaces food production, leading to resource scarcity and limited living standards.

    Money

    • Anything widely accepted as payment for goods and services, acts as a store of value and a means of settling debts.

    Stages of Payment Evolution

    • Autarky: Production and consumption within a family or tribe, money not used.
    • Barter: Exchange of goods or services directly for other goods or services.
    • Commodity Money: Using uncoined metals (gold, silver, copper) as money.
    • Coinage: Standardized metal coins to prevent short weighting (deception in weight).
    • IOU: Written promises to pay (I owe you).
    • Specialized Bankers: Keeping and lending out a portion of entrusted money.
    • Electronic Fund Transfer System/Electronic Money: Transactions through computer terminals and automated systems.

    Central Bank of the Philippines

    • The country's central bank, publicly owned and a non-profit government institution.
    • Responsible for currency issuance, serving as the government's banker, and regulating monetary and financial activities.

    Characteristics of the Central Bank of the Philippines

    • Publicly owned, non-profit government bank.
    • Issues currency and is the ultimate source of money.
    • Serves as the government's banker and financial advisor.
    • Acts as a "banker's bank" for other banks.
    • Serves as the "lender of last resort" to banks in financial emergencies.
    • Holds the country's foreign exchange reserves.
    • Regulates monetary and financial activities.

    The Central Bank of the Philippines was established in 1948

    • Formally opened and began operations on January 3, 1949.
    • Regulates money supply and supervises the financial system.

    Main Objectives of the Central Bank of the Philippines

    • Maintaining price stability of the peso.
    • Fostering monetary, credit, and exchange conditions conducive to economic growth.

    Instruments of Monetary Control

    • The Central Bank uses various instruments to regulate money supply and influence economic activity.

    Gross Domestic Product (GDP): Formula

    • GDP = C + I + G + (X-M)

    • Where:

      • C = Consumer spending
      • I = Investment spending
      • G = Government spending
      • X = Exports
      • M = Imports

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