Podcast
Questions and Answers
Which of the following scenarios best exemplifies the economic concept of scarcity?
Which of the following scenarios best exemplifies the economic concept of scarcity?
- A country has abundant oil reserves exceeding its consumption needs.
- A software company has unlimited funds to develop new applications.
- A consumer must decide between purchasing a new phone or a laptop with a limited budget. (correct)
- A factory can produce any quantity of goods without any constraints on resources.
A government imposes a new tax on gasoline. Using economic principles, which statement is MOST LIKELY to be a positive economic statement?
A government imposes a new tax on gasoline. Using economic principles, which statement is MOST LIKELY to be a positive economic statement?
- The government should not tax gasoline because it burdens low-income individuals.
- Gasoline taxes are unfair and should be abolished immediately.
- The optimal tax rate on gasoline should be determined by considering social equity.
- The new tax on gasoline will reduce consumption by 10% in the first year. (correct)
If a country decides to shift resources from producing consumer goods to capital goods, what is the MOST LIKELY impact on its Production Possibility Frontier (PPF)?
If a country decides to shift resources from producing consumer goods to capital goods, what is the MOST LIKELY impact on its Production Possibility Frontier (PPF)?
- The PPF will shift outward over time, indicating potential future economic growth. (correct)
- The PPF will shift inward, indicating economic decline.
- The PPF will become linear, indicating constant opportunity costs.
- The PPF will remain unchanged as the total resources are constant.
A car manufacturer adopts a division of labor by assigning specific tasks to different teams. What is a potential disadvantage of this approach?
A car manufacturer adopts a division of labor by assigning specific tasks to different teams. What is a potential disadvantage of this approach?
Which of the following is a key characteristic of a free market economy?
Which of the following is a key characteristic of a free market economy?
What is a potential drawback of a command economy?
What is a potential drawback of a command economy?
In a mixed economy, what role does the government TYPICALLY play?
In a mixed economy, what role does the government TYPICALLY play?
What causes a movement along the demand curve for a product?
What causes a movement along the demand curve for a product?
What factor would NOT typically cause a shift in the supply curve for wheat?
What factor would NOT typically cause a shift in the supply curve for wheat?
If the price elasticity of demand (PED) for a product is 0.75, what does this indicate about the demand for the product?
If the price elasticity of demand (PED) for a product is 0.75, what does this indicate about the demand for the product?
What is the primary difference between renewable and non-renewable resources?
What is the primary difference between renewable and non-renewable resources?
Suppose a country decides to invest heavily in education rather than infrastructure. What economic concept does this illustrate?
Suppose a country decides to invest heavily in education rather than infrastructure. What economic concept does this illustrate?
Which of the following is MOST LIKELY to cause a PPF to shift inward?
Which of the following is MOST LIKELY to cause a PPF to shift inward?
How does specialization typically lead to increased productivity?
How does specialization typically lead to increased productivity?
A city government implements rent control, setting maximum rental prices below the market equilibrium. What is a likely consequence?
A city government implements rent control, setting maximum rental prices below the market equilibrium. What is a likely consequence?
Suppose the government increases taxes on businesses. How is this MOST LIKELY to affect the supply curve?
Suppose the government increases taxes on businesses. How is this MOST LIKELY to affect the supply curve?
If a product has a high price elasticity of demand, what happens to total revenue if the price is decreased?
If a product has a high price elasticity of demand, what happens to total revenue if the price is decreased?
Which action is an example of a normative economic statement?
Which action is an example of a normative economic statement?
What BEST describes the shape of a typical Production Possibility Frontier (PPF)?
What BEST describes the shape of a typical Production Possibility Frontier (PPF)?
Which is a likely consequence of increased specialization and division of labor in manufacturing?
Which is a likely consequence of increased specialization and division of labor in manufacturing?
Flashcards
Economics as a Social Science
Economics as a Social Science
Economics studies how humans allocate resources, but precise predictions are difficult due to the complexity of human behaviour.
Ceteris Paribus
Ceteris Paribus
Economic models simplify reality using 'ceteris paribus,' assuming all else is constant to isolate the impact of one variable.
Positive Statement
Positive Statement
Statements of fact that can be tested and verified.
Normative Statement
Normative Statement
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Scarcity
Scarcity
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Factors of Production
Factors of Production
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Renewable Resources
Renewable Resources
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Non-Renewable Resources
Non-Renewable Resources
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Opportunity Cost
Opportunity Cost
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Production Possibility Frontier (PPF)
Production Possibility Frontier (PPF)
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Outward Shift of PPF
Outward Shift of PPF
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Specialisation & Division of Labour
Specialisation & Division of Labour
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Free Market
Free Market
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Pros of Free Market
Pros of Free Market
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Command Economy
Command Economy
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Pros of a Command Economy
Pros of a Command Economy
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Mixed Economy
Mixed Economy
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Demand Curve
Demand Curve
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Supply Curve
Supply Curve
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Price Elasticity of Demand (PED)
Price Elasticity of Demand (PED)
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Study Notes
- Economics is a social science that examines how humans allocate resources.
- Precise predictions are challenging due to the complexities of human behavior.
Economic Models
- Economic models simplify complex realities to isolate specific variables.
- Ceteris paribus, meaning "all else equal," is used to hold other variables constant.
Positive vs. Normative Statements
- Positive statements are fact-based and can be verified.
- Example of a positive statement: "Tax cuts increase sales by 15%."
- Normative statements are value-based and subjective.
- Example of a normative statement: "The government should spend more on healthcare."
The Economic Problem
- Scarcity arises from unlimited wants conflicting with limited resources.
- Scarcity necessitates choices, leading to opportunity costs.
- The factors of production are Land, Labour, Capital, and Enterprise.
- Renewable resources, such as wind and solar, can be replenished.
- Non-renewable resources, such as oil and coal, are finite.
Opportunity Cost & PPFs
- Opportunity cost is the value of the next best alternative forgone.
- Example of opportunity cost: choosing to spend on education instead of healthcare.
- Production Possibility Frontiers (PPFs) show the maximum output combinations possible when resources are fully utilized.
- Outward shifts in the PPF indicate economic growth, resulting from increased resources or technological advancements.
- Inward shifts in the PPF indicate economic decline, possibly due to war or disasters.
- PPFs are typically concave due to increasing opportunity costs.
Specialisation & Division of Labour
- Specialization and division of labor lead to higher productivity, lower costs, and skill development.
- Disadvantages include monotony, worker dependency, and over-reliance on trade.
Market Systems
- In a free market, prices are determined by supply and demand with minimal government intervention.
- Free markets promote efficiency and innovation.
- Free markets can result in inequality and boom-bust cycles.
- In a command economy, the government controls production.
- Command economies can provide full employment and equality.
- Command economies often suffer from low productivity and shortages.
- Most economies are mixed, combining elements of both private and state enterprise.
Demand & Supply
- The demand curve is downward-sloping, indicating that as price increases, quantity demanded decreases.
- Shifts in the demand curve are caused by changes in income, preferences, and prices of substitutes or complements.
- The supply curve is upward-sloping, indicating that as price increases, quantity supplied increases.
- Shifts in the supply curve are caused by changes in costs, technology, subsidies, or taxes.
Elasticity
- PED (Price Elasticity of Demand) measures the responsiveness of quantity demanded to price changes.
- Demand is elastic when PED is greater than 1.
- Demand is inelastic when PED is less than 1.
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