Microeconomics Overview

The Law of Demand states that as prices increase, quantity demanded decreases, while the Law of Supply states that as prices increase, quantity supplied increases. Equilibrium occurs when the quantity demanded equals the quantity supplied at a specific price.

Nominal GDP measures a country's economic output without adjusting for inflation, while real GDP accounts for inflation, providing a more accurate reflection of an economy's size and how it's growing over time. This distinction is essential for assessing economic health and making policy decisions.

Indifference curves represent combinations of goods that provide the same level of satisfaction, allowing consumers to choose bundles that maximize their utility based on their budget constraints. Consumers aim to reach the highest curve possible within their means.

<p>Elasticity measures how responsive the quantity demanded or supplied is to price changes. It is significant because it determines how much price fluctuations will affect overall sales and revenue.</p> Signup and view all the answers

<p>The primary tools of monetary policy include open market operations, the discount rate, and reserve requirements. These tools influence the money supply and interest rates, impacting economic activity and stability.</p> Signup and view all the answers

<p>Monopoly is characterized by a single firm that controls the market with high barriers to entry, while perfect competition consists of many firms offering identical products with no barriers to entry. This difference affects pricing, output decisions, and consumer choices.</p> Signup and view all the answers

<p>Fiscal policy involves government spending and taxation decisions that can stimulate or slow down economic growth. By adjusting these factors, a government can manage demand, influence employment, and stabilize the economy.</p> Signup and view all the answers

<p>Frictional, structural, cyclical, and seasonal unemployment indicate various factors affecting job availability, reflecting the health of an economy. High levels of unemployment can signal economic distress, whereas low levels may indicate growth.</p> Signup and view all the answers

<p>Inflation is measured by the rate at which the general level of prices is rising, which is commonly assessed through the Consumer Price Index (CPI), a statistical estimate that monitors the average change over time in the prices paid by consumers for a basket of goods and services.</p> Signup and view all the answers

<p>Technological innovation leads to improvements in production efficiency and the development of new goods and services, which can significantly increase a country's overall production capacity and drive economic growth.</p> Signup and view all the answers