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Questions and Answers
A good with a price elasticity of demand (PED) greater than 1 is considered elastic, meaning that a change in price leads to a proportionally larger change in quantity demanded.
A good with a price elasticity of demand (PED) greater than 1 is considered elastic, meaning that a change in price leads to a proportionally larger change in quantity demanded.
True (A)
In a perfectly competitive market, firms can easily enter and exit the market, leading to zero economic profits in the long run.
In a perfectly competitive market, firms can easily enter and exit the market, leading to zero economic profits in the long run.
True (A)
A subsidy is a form of government intervention that aims to decrease the supply of a good or service.
A subsidy is a form of government intervention that aims to decrease the supply of a good or service.
False (B)
A country has a comparative advantage in producing a good if it can produce it at a lower opportunity cost than another country.
A country has a comparative advantage in producing a good if it can produce it at a lower opportunity cost than another country.
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Inflation can be measured using the Consumer Price Index (CPI) which tracks changes in the prices of a basket of goods and services commonly consumed by households.
Inflation can be measured using the Consumer Price Index (CPI) which tracks changes in the prices of a basket of goods and services commonly consumed by households.
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The unemployment rate measures the percentage of the population that is actively seeking employment.
The unemployment rate measures the percentage of the population that is actively seeking employment.
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A monopoly is a market structure characterized by many firms producing identical products.
A monopoly is a market structure characterized by many firms producing identical products.
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An oligopoly is a market structure with a few firms controlling a significant portion of the market, with potential for barriers to entry.
An oligopoly is a market structure with a few firms controlling a significant portion of the market, with potential for barriers to entry.
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Flashcards
Basic Economic Problem
Basic Economic Problem
Scarcity of resources forces choices about allocation.
Demand
Demand
The quantity consumers are willing to buy at various prices.
Supply
Supply
The quantity producers are willing to sell at different prices.
Equilibrium
Equilibrium
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Price Elasticity of Demand (PED)
Price Elasticity of Demand (PED)
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Comparative Advantage
Comparative Advantage
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GDP
GDP
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Inflation
Inflation
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Study Notes
Basic Economic Problem
- Scarcity: Resources are limited, forcing choices.
- Choice: Decisions must be made on how to use finite resources efficiently.
Demand and Supply
- Demand: Consumers' willingness and ability to buy goods/services at different prices.
- Supply: Producers' willingness and ability to sell goods/services at different prices.
- Equilibrium: Market price where supply equals demand.
Market Structures
- Perfect Competition: Many firms, identical products, easy entry.
- Monopoly: Single firm dominates, significant barriers to entry.
- Oligopoly: Few firms dominate, often resulting in strategic interaction.
Elasticity
- Price Elasticity of Demand (PED): Measures responsiveness of quantity demanded to price changes.
- Income Elasticity of Demand (YED): Measures responsiveness of quantity demanded to changes in consumer income.
Government Intervention
- Taxes: Discourage consumption or increase government revenue.
- Subsidies: Financial aid to encourage production/consumption.
- Price Controls: Government-set minimum or maximum prices.
International Trade
- Comparative Advantage: Producing at a lower opportunity cost than another country, facilitating trade.
- Balance of Payments: Record of all economic transactions between a country and the rest of the world.
Economic Indicators
- GDP (Gross Domestic Product): Total value of goods/services produced in a country.
- Inflation: Increase in general price level, decreasing purchasing power.
- Unemployment Rate: Percentage of unemployed, actively seeking work in the labor force.
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Description
This quiz covers fundamental concepts in economics, including scarcity, demand and supply, market structures, elasticity, and government intervention. Test your understanding of how resources are allocated and the impact of various market forces.
