Introduction to Economics Concepts
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Questions and Answers

What term describes the coexistence of the government and the private sector in economic decision-making?

  • Capitalism
  • Mixed Economy (correct)
  • Monopoly
  • Socialism

    • Normative economics is based on facts.

    False

    Name one characteristic of a mixed market.

    Private Ownership

    Positive economics explains economic phenomena in __________ terms.

    <p>verifiable</p> Signup and view all the answers

    Match each aspect of economic study with its definition:

    <p>Positive economics = Describes and explains economic phenomena Normative economics = Focuses on value judgments and fairness Resource allocation = Distribution of resources in an economy Public services = Government-funded services for the public</p> Signup and view all the answers

    Which of the following could be a goal of normative economics?

    <p>Reducing unemployment rates</p> Signup and view all the answers

    Competition is not a characteristic of a mixed market.

    <p>False</p> Signup and view all the answers

    What type of economic policy might be considered to sustain or reduce unemployment rates?

    <p>targeted economic policies</p> Signup and view all the answers

    What is the primary role of an entrepreneur in economics?

    <p>To make decisions related to production</p> Signup and view all the answers

    Scarcity refers to the fact that human wants and needs are limited.

    <p>False</p> Signup and view all the answers

    What are the basic economic questions that need to be addressed?

    <p>How to produce, what to produce, for whom to produce</p> Signup and view all the answers

    In a free market, companies and resources are owned by ______ individuals or entities.

    <p>private</p> Signup and view all the answers

    Which of the following best describes a 'trade-off'?

    <p>Giving up one thing to gain another</p> Signup and view all the answers

    Match the economic concepts with their descriptions:

    <p>Private Ownership = Ownership by individuals or entities Market Forces = Supply and demand control the economy Competition = Rivalry among businesses for resources and customers Consumer Choice = Decisions made by consumers based on preferences</p> Signup and view all the answers

    In a free market, the government has complete control over economic activities.

    <p>False</p> Signup and view all the answers

    What is rationality in the context of economic decision-making?

    <p>The assumption that individuals make choices to maximize their utility based on their preferences and constraints.</p> Signup and view all the answers

    What does perfect information in economic theory assume?

    <p>Consumers and producers have complete and accurate information</p> Signup and view all the answers

    Ceteris paribus means 'everything else is variable'.

    <p>False</p> Signup and view all the answers

    What economic theory suggests that population growth may outpace resource production?

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

    In Keynesian economics, ____ demand is key to understanding economic output.

    <p>aggregate</p> Signup and view all the answers

    Which of the following best describes laissez-faire?

    <p>A theory of free-market capitalism</p> Signup and view all the answers

    The Keynesian model is solely focused on individual behaviors in the economy.

    <p>False</p> Signup and view all the answers

    What does the failure to hold things constant under ceteris paribus lead to?

    <p>Errors in analysis</p> Signup and view all the answers

    Match the economic theories to their descriptions:

    <p>Perfect Information = Consumers and producers have full knowledge Ceteris Paribus = Assumes other factors are constant Malthusian Economics = Population growth vs. linear resource production Keynesian Economics = Aggregate demand impacts the entire economy</p> Signup and view all the answers

    What is defined as a condition where individuals lack basic necessities for survival?

    <p>Absolute poverty</p> Signup and view all the answers

    Unemployment is when individuals are employed in jobs that do not utilize their skills.

    <p>False</p> Signup and view all the answers

    What impact does high unemployment have on economic development?

    <p>It leads to the underutilization of labor resources and reduces household income, stalling economic progress.</p> Signup and view all the answers

    Individuals experiencing ______ work in jobs below their skills or education level.

    <p>underemployment</p> Signup and view all the answers

    Match the types of unemployment or underemployment with their definitions:

    <p>Visible Underemployment = Working fewer hours than desired Invisible Underemployment = Working in roles that underutilize skills Unemployment = Willing and able to work but cannot find a job Absolute Poverty = Lack of basic necessities for survival</p> Signup and view all the answers

    What effect does hysteresis have on unemployment?

    <p>It erodes skills over time, making re-entry into the workforce harder.</p> Signup and view all the answers

    Underemployment is only related to employees who want more hours.

    <p>False</p> Signup and view all the answers

    What are the key determinants of demand?

    <p>Factors that influence the quantity of a good or service consumers are willing to purchase at a given price.</p> Signup and view all the answers

    What does relative poverty measure?

    <p>Income below a country's median level.</p> Signup and view all the answers

    The O-Ring Theory focuses solely on high-quality labor without any regard to task interdependence.

    <p>False</p> Signup and view all the answers

    Who developed the O-Ring Theory?

    <p>Michael Kremer</p> Signup and view all the answers

    In relative poverty, individuals are often defined as poor if they earn less than _____ of the median income in their country.

    <p>50%</p> Signup and view all the answers

    Match the following concepts with their descriptions:

    <p>Absolute Poverty = Severe deprivation of basic human needs. Relative Poverty = Comparison of income within a specific society. O-Ring Theory = Interconnectedness of tasks in production. Inequality = Disparities in income and resources among individuals.</p> Signup and view all the answers

    What is one of the key features of relative poverty?

    <p>It varies by country and over time.</p> Signup and view all the answers

    Economic underdevelopment can be influenced by the presence of widespread poverty.

    <p>True</p> Signup and view all the answers

    What major impact does relative poverty have on individuals?

    <p>It emphasizes social inequality and affects quality of life.</p> Signup and view all the answers

    What is one effect of high inflation?

    <p>Erodes purchasing power</p> Signup and view all the answers

    A leftward shift in the demand curve indicates an increase in demand.

    <p>False</p> Signup and view all the answers

    What does a change in demand reflect?

    <p>Shifts in the demand curve due to external factors.</p> Signup and view all the answers

    The law of demand states that as the price of a good increases, the quantity demanded __________.

    <p>decreases</p> Signup and view all the answers

    Which of the following can cause a decrease in demand?

    <p>Fall in the price of substitutes</p> Signup and view all the answers

    Match the following scenarios with their impact on demand:

    <p>Increase in consumer income = Increase in demand for normal goods Rise in the price of complementary goods = Decrease in demand Change in preferences favoring streaming = Decrease in demand for DVDs Positive future expectations = Increase in demand</p> Signup and view all the answers

    A __________ is a graphical representation of the relationship between the price of a good and the quantity demanded.

    <p>demand curve</p> Signup and view all the answers

    What typically happens to the demand for electric vehicles as governments provide subsidies?

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

    Study Notes

    Defining Economics

    • Economics is the effective management of scarce resources to satisfy unlimited human needs and wants.
    • It studies how individuals, groups, and societies produce, consume, and distribute goods and services.
    • Economics origins can be traced to Adam Smith's book "An Inquiry into the Nature and Causes of the Wealth of Nations."

    Basic Economic Concepts

    • Scarcity: Limited resources (land, labor, capital, entrepreneurship) in contrast to unlimited needs and wants.
    • Unlimited Needs and Wants: Human desires for goods and services are endless.
    • Rationality: Individuals make choices to maximize their utility, given their preferences and constraints.
      • Example: A store orders essentials like bread and milk, predicting customer demand.
    • Trade-offs: Choosing one option over another, involving sacrifices.
      • Example: Vacation expenses versus savings for future investment.
    • Opportunity cost: Value of the next best alternative lost when making a decision.
      • Example: Purchasing tractors, losing the profitability of an alternative project.

    Economic Resources (Factors of Production)

    • Land: Natural resources (e.g., land, water, minerals). Payment is rent.
    • Labor: Human skills and effort. Payment is wages/salaries.
    • Capital: Man-made resources (e.g., machinery, tools). Payment is interest.
    • Entrepreneurship: Combining other factors to create new products/services.

    Basic Economic Questions

    • How to produce?
    • What to produce?
    • For whom to produce?

    Economic Systems

    • Free Market: Economic decisions based on supply and demand, with minimal government intervention.
    • Characteristics: Private ownership, competition, market forces, resource allocation.

    Command System

    • Economic decisions controlled by a central authority (typically government).
    • Characteristics: Central planning, public ownership, limited consumer choice, production quotas.

    Mixed System

    • Coexistence of government and private sectors in economic decision-making and resource allocation.
    • Characteristics: Private and government ownership, regulation, market forces, taxes and redistribution.

    Economic Theory

    • Economic theories: A set of principles and ideas that explain how economies function.

      • Example: Keynesian economics analyzes the relationship between aggregate demand and economic output.

    • Assumptions: Economic theories often make simplified assumptions to better understand behavior.

    • Rationality: Individuals make logical decisions.

    • Profit Maximization: Businesses strive to maximize profits.

    • Perfect Information: Clear and accurate information is available.

    • Ceteris Paribus: Holding all other conditions equal.

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    Description

    This quiz covers the fundamental concepts of economics, including scarcity, unlimited needs and wants, rationality, trade-offs, and opportunity cost. Understanding these concepts is essential for analyzing how resources are managed and allocated in societies. Explore the origins of economic thought with references to Adam Smith's work.

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