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Questions and Answers
What is the definition of economics?
The study of how individuals and societies allocate scarce resources to satisfy unlimited wants.
Which of the following describes scarcity?
What is meant by opportunity cost?
The value of the next best alternative foregone.
The four factors of production include land, labor, capital, and __________.
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What does the Production Possibility Curve (PPC) illustrate?
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The law of demand states that as the price of a good increases, the quantity demanded also increases.
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What is market equilibrium?
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Match the market structures with their characteristics:
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Study Notes
Introduction to Economics
- Economics is the study of how people and societies make decisions with limited resources to meet their unlimited wants.
- Scarcity is a key concept as there are limited resources to meet unlimited wants.
- Choices involve trade-offs due to scarcity.
- Opportunity cost is the value of the best alternative forgone when a choice is made.
The Economic Problem
- Factors of production are the inputs used to produce goods and services.
- Land refers to natural resources like minerals and forests.
- Labor is human effort in production, such as working in a factory.
- Capital refers to man-made tools and machinery used in production, like computers or factories.
- Entrepreneurship is the ability to combine resources and take risks to create new products and services.
- The Production Possibility Curve (PPC) shows all possible combinations of goods an economy can produce with its available resources.
- Shifts in the PPC can be caused by economic growth, which can be due to technological advancements or an increase in available resources.
Demand and Supply
- The Law of Demand states that as the price of a good falls, the quantity demanded increases, and vice versa.
- The Demand Curve is a downward sloping curve representing the relationship between price and quantity demanded.
- The Law of Supply states that as the price of a good increases, the quantity supplied increases, and vice versa.
- The Supply Curve is an upward sloping curve representing the relationship between price and quantity supplied.
- Market Equilibrium occurs when the quantity demanded equals the quantity supplied.
- Factors that affect demand include income, tastes, prices of related goods, and expectations.
- Factors that affect supply include production costs, technology, number of suppliers, and expectations.
Market Structures
- Perfect competition is characterized by many firms, homogeneous products, and price-taking behavior.
- Monopolistic competition is characterized by many firms, differentiated products, and some control over price.
- Oligopoly is characterized by a few firms, interdependent pricing, and potential for collusion. An example is the airline industry.
- Monopoly is characterized by a single firm, significant price-setting power, and barriers to entry.
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Description
This quiz covers the fundamental concepts of economics, including scarcity, opportunity cost, and the factors of production. Gain insights into how societies make choices and the implications of trade-offs. Test your knowledge on essential economic theories and terms.
