Podcast
Questions and Answers
Which of the following best defines economics?
Which of the following best defines economics?
- The study of government regulations on businesses.
- The study of how people allocate limited resources to satisfy unlimited wants. (correct)
- The study of stock market trends.
- The study of historical events.
Macroeconomics focuses on the economic behavior of individual consumers and firms.
Macroeconomics focuses on the economic behavior of individual consumers and firms.
False (B)
Which of the following is an example of a positive economic statement?
Which of the following is an example of a positive economic statement?
- Pollution is the most serious economic problem.
- The government should increase taxes to fund education.
- If the government increases the tax on cigarettes, people will purchase fewer cigarettes. (correct)
- Unemployment is more harmful than inflation.
Normative economics deals with objective explanations and factual analysis.
Normative economics deals with objective explanations and factual analysis.
Name the three basic questions that every economic system must answer.
Name the three basic questions that every economic system must answer.
The economic problem arises from the condition of ______ and unlimited wants.
The economic problem arises from the condition of ______ and unlimited wants.
What does rational self-interest primarily involve?
What does rational self-interest primarily involve?
Rational self-interest assumes that people are always selfish and never consider the well-being of others.
Rational self-interest assumes that people are always selfish and never consider the well-being of others.
Which of the following is considered a factor of production?
Which of the following is considered a factor of production?
Social overhead capital, such as transport and communication infrastructure, is usually supplied by the ______.
Social overhead capital, such as transport and communication infrastructure, is usually supplied by the ______.
What is the primary role of enterprise in the context of economic resources?
What is the primary role of enterprise in the context of economic resources?
An entrepreneur's primary role is to provide labor in the production process.
An entrepreneur's primary role is to provide labor in the production process.
According to the concept of opportunity cost, what is the true cost of a choice?
According to the concept of opportunity cost, what is the true cost of a choice?
Opportunity cost is only relevant to businesses, not to individual consumers.
Opportunity cost is only relevant to businesses, not to individual consumers.
The law of decreasing marginal benefits suggests that:
The law of decreasing marginal benefits suggests that:
What is Marginal Analysis?
What is Marginal Analysis?
In economics, what is the purpose of marginal analysis?
In economics, what is the purpose of marginal analysis?
The goal of marginal analysis is to maximize total benefits regardless of the costs incurred.
The goal of marginal analysis is to maximize total benefits regardless of the costs incurred.
What are economic models used for?
What are economic models used for?
What does 'ceteris paribus' mean in the context of economic models?
What does 'ceteris paribus' mean in the context of economic models?
Economic models always perfectly predict future economic events.
Economic models always perfectly predict future economic events.
The Production Possibilities Frontier (PPF) illustrates the concept of ______ and opportunity cost.
The Production Possibilities Frontier (PPF) illustrates the concept of ______ and opportunity cost.
What does the Production Possibilities Frontier (PPF) represent?
What does the Production Possibilities Frontier (PPF) represent?
Points outside the PPF are attainable with current resources and technology.
Points outside the PPF are attainable with current resources and technology.
Which of the following is an assumption made in the PPF model?
Which of the following is an assumption made in the PPF model?
The shape of the PPF is always a straight line.
The shape of the PPF is always a straight line.
Points that lie on the PPF illustrate combinations of output that are ______ efficient.
Points that lie on the PPF illustrate combinations of output that are ______ efficient.
What does the slope of the PPF indicate?
What does the slope of the PPF indicate?
An outward shift of the PPF indicates economic decline.
An outward shift of the PPF indicates economic decline.
The law of increasing opportunity cost suggests that:
The law of increasing opportunity cost suggests that:
Match the economic system with its primary characteristic:
Match the economic system with its primary characteristic:
Which of the following is a key characteristic of a market economy?
Which of the following is a key characteristic of a market economy?
In a planned economy, resource allocation is primarily determined by supply and demand.
In a planned economy, resource allocation is primarily determined by supply and demand.
In a market economy, how are production patterns and quality determined?
In a market economy, how are production patterns and quality determined?
In a ______ economy, the government plays a dominant role.
In a ______ economy, the government plays a dominant role.
Which of these best describes how a market economy answers the question of "how to produce"?
Which of these best describes how a market economy answers the question of "how to produce"?
In a market system allocation of resources is mainly determined by government planning
In a market system allocation of resources is mainly determined by government planning
What can governments in mixed economies intervene?
What can governments in mixed economies intervene?
Why do consumers cast their dollar?
Why do consumers cast their dollar?
Flashcards
What is Economics?
What is Economics?
The study of how people allocate limited resources to satisfy unlimited wants, focusing on scarcity and choice.
Microeconomics
Microeconomics
Deals with individual or smaller perspectives within the economy.
Macroeconomics
Macroeconomics
Deals with a larger, society-wide view of the economy.
Positive Economics
Positive Economics
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Normative Economics
Normative Economics
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Scarcity
Scarcity
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Economic Decision Making
Economic Decision Making
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Rational Self-Interest
Rational Self-Interest
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Economic Resources
Economic Resources
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Natural Resources
Natural Resources
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Human Resources
Human Resources
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Enterprise
Enterprise
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Capital Resources
Capital Resources
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Opportunity Cost
Opportunity Cost
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Decreasing Marginal Benefits
Decreasing Marginal Benefits
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Marginal Analysis
Marginal Analysis
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Marginal Benefit
Marginal Benefit
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Marginal Cost
Marginal Cost
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Production Possibilities Frontier
Production Possibilities Frontier
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Productively Efficient
Productively Efficient
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Allocatively Efficient
Allocatively Efficient
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Law of Increasing Opportunity Cost
Law of Increasing Opportunity Cost
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Market Economy
Market Economy
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Planned Economy
Planned Economy
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Mixed Economy
Mixed Economy
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Private Property
Private Property
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Price mechanism
Price mechanism
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Competition between consumers and produces.
Competition between consumers and produces.
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Study Notes
Economics Introduction
- Economics studies how people allocate scarce resources to meet unlimited wants, addressing scarcity and choice.
Macro vs. Micro Economics
- Microeconomics focuses on individual entities, whereas macroeconomics looks at the bigger picture of a society.
Positive vs. Normative Economics
- Positive economics develops and tests economic theories with factual information.
- Normative economics involves opinions and value judgments about what "should be."
Economic Decision Making
- Three basic questions are addressed in every economic sytem: What to produce? How to produce? For whom to produce?
Problems in Economics
- Scarcity is the start of economic problems, because there are not enough resources.
- Because of scarcity people need to make choices on how to spend resources.
Rational Self-Interest
- Rational self-interest can be used by economists to explain human behavior.
- Individuals are assumed to be rational and respond to incentives by economists.
- A rational person analyzes costs and benefits before acting including reacting to incentives.
Scarcity and Rational Self-Interest
- The demand for water has increased in Australia, in a supply vs demand situation.
- The price of water has been kept low, which is the reason for the water shortage.
- Low signal incentive is bad because water is considered free when this is not the case.
- Pricing should mirror scarcity value to encourage informed consumer use.
Economic Resources
- Types of resources include CELL: Capital, Enterprise, Land and Labour.
- Natural resources are gifts of nature like air, water, soil, and vegetation.
- Human resources includes labor (quantity and quality), and the coordination by worker or management.
- Enterprise is the management of production by an entrepreneur.
- Capital includes man-made resources assisting in production, physical or financial tools, and social overhead capital.
- Social overhead capital include Basic Infrastructure and is Provided by Governments
Opportunity Cost
- The opportunity cost is the value of the best alternative forgone. Example video included: https://www.youtube.com/watch?v=x-hYzRncxTc
- Missed opportunities are easy to overlook however they help with in business decisions.
Law of Decreasing Marginal Benefits
- When consuming more units of a product, the satisfaction from each unit will decline; needs meet fulfilled by one purchase.
Marginal Analysis
- Marginal Analysis balances additional activity advantages with additional costs.
- "Marginal Benefit" describes pluses from an additional portion in units.
- "Marginal Cost" refers to extra payments from an increase by unit.
Hospital Analysis
- Marginal analysis in resource decisions, with costs/benefits to find Marginal Benifit with Marginal Cost.
Economic Models
- Economic theory seeks to explain cause and effect between two components.
- The ceteris paribus assumes other conditions constant, while analysing variable effects.
- Economists use models to depict relationships and their cause and effect.
- The ability to accurately predict economic occurrence is the use case of ecomonic models.
Production Possibility Frontier (PPF) Curve
- PPF curve illustrates scarcity, opportunity cost, and is used to assess available goods and services, assuming fixed resources, technology, and two-good production.
PPF Analysis
- The slope of the PPF reflects opportunity cost, and assessing relative production efficiency.
How Opportunity Cost Can Be Calculated from the schedule of the PPF
- Video included provides more information: https://www.youtube.com/watch?v=00fgAG6VrRQ
Market Economy Foundations
- Private ownership, individual freedom, and consumer sovereignty make key decisions.
- Individual behavior is motivated by self-interest or and profit.
The price mechanism enables consumer spending decisions.
- Economics are classified by production, distribution, exchange and ownership.
System Classification
- This is determined on Role of markets, market forces, the demand, supply, government and economic life.
Economic System
- Two common forms of sytems include: market economy and the planned economy.
Market Economy
- Goods and services depend on consumer desires and sovereignty.
- The distribution is dictated by factor incomes that create the ability to buy.
Planned Economy
- Government sets output targets via central planning agency that creates short, medium or long plans.
- Allocation uses government estimates for resource and demand balances.
- Distribution attempts to be based on need or areas of state priority
Mixed Economies
- Most modern-day economies that mix, regulation, services, redistribution and stabilization, all through macroeconomic objectives
Market Fundamentals
- Markets allow the allocation of scarce resources to satisfy wants.
- Places where buyers and sellers convene to exchange goods & services also include exchange of goods for money with exchanges done between people and corporations.
Competitive vs. Non-Competitive Markets
- Competitive markets: Many buyers and sellers; firms are price takers; homogeneous products; easy entry/exit.
- Non-competitive markets: Few firms; product differentiation; firms set prices (market power); entry/exit barriers.
Imperfect Markets Examples
– Monopoly, duopoly, and oligopoly examples.
Market economy
- Includes private property, economic freedom, consumer sovereignty, competition for profit, voluntary exchanges, and limited government role.
Consumers vs Producers
- Consumer is king and producers respond to consumers, by varying the supply or pricing.
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