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chapter 1-6 Flashcards

(75 cards)

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1
Q

What is the basic economic problem?

A

Scarcity: limited resources vs unlimited wants

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2
Q

Why do we face scarcity?

A

Resources are finite but wants are infinite

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3
Q

What is economics?

A

The study of how people allocate scarce resources

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4
Q

What are needs?

A

Essential items for survival (e.g., food, water, shelter)

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5
Q

What are wants?

A

Non-essential items that improve quality of life

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6
Q

What is meant by choice in economics?

A

Deciding how to use limited resources

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7
Q

What are economic agents?

A

Consumers, producers, and governments making economic decisions

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8
Q

What are goods?

A

Tangible products like food, clothes, cars

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9
Q

What are services?

A

Intangible products like healthcare, education

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10
Q

What is scarcity?

A

The fundamental problem of not having enough resources to satisfy all wants

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11
Q

How does scarcity lead to choice?

A

People must prioritize needs and wants

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12
Q

Why does scarcity lead to opportunity cost?

A

Choosing one option means forgoing another

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13
Q

What is meant by economic problem being universal?

A

It affects all individuals, firms, and governments

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14
Q

Why are choices necessary in all societies?

A

Because resources are limited and cannot satisfy all wants

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15
Q

What is the role of government in addressing scarcity?

A

Allocate resources, provide public goods, regulate markets

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16
Q

What are the four factors of production?

A

Capital, Enterprise, Labour, Land

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17
Q

What is land in economics?

A

Natural resources used in production

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18
Q

What is labour?

A

Human effort used in production

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19
Q

What is capital?

A

Man-made goods used to produce other goods/services

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20
Q

What is enterprise?

A

The organization and risk-taking by entrepreneurs

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21
Q

Give an example of land as a factor of production.

A

Farmland, minerals, water

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22
Q

Give an example of labour.

A

A teacher, builder, or doctor

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23
Q

Give an example of capital.

A

Machinery, tools, factories

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24
Q

What is a reward for land?

A

Rent

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25
What is a reward for labour?
Wage or salaries
26
What is a reward for capital?
Interest
27
What is a reward for enterprise?
Profit
28
What is human capital?
Skills and knowledge of workers
29
What is physical capital?
Tangible man-made goods used in production
30
How can education affect labour productivity?
Better skills lead to higher productivity
31
What is opportunity cost?
The next best alternative foregone
32
Why is opportunity cost important?
Helps in making informed economic decisions
33
Give an example of opportunity cost for a consumer.
Choosing to buy a phone instead of saving money
34
Give an example of opportunity cost for a producer.
Making cars instead of buses
35
Give an example of opportunity cost for a government.
Spending on defense instead of healthcare
36
What is the opportunity cost of choosing leisure over work?
The lost wages or income
37
Can opportunity cost be zero?
Rarely; usually, there's always an alternative
38
How does opportunity cost relate to resource allocation?
It guides how best to use scarce resources
39
Why is opportunity cost a key concept in economics?
It affects all decisions due to scarcity
40
How does opportunity cost influence trade-offs?
Trade-offs arise because choosing one option means losing another
41
What is a Production Possibility Curve (PPC)?
A graph showing the maximum possible output combinations
42
What does a point on the PPC represent?
Efficient use of resources.
43
What does a point inside the PPC mean?
Underutilized or inefficient use of resources
44
What does a point outside the PPC mean?
Currently unattainable with available resources
45
What can shift the PPC outward?
Economic growth, new technology, improved education
46
What can shift the PPC inward?
Natural disasters, war, loss of labour force
47
What is economic growth on a PPC?
Outward shift of the curve
48
What are the axes on a PPC diagram?
Two different goods or services
49
What does the shape of the PPC show?
Increasing opportunity cost due to resource specialization
50
How does the PPC illustrate opportunity cost?
Moving along the curve shows what is sacrificed
51
What does a straight-line PPC indicate?
Constant opportunity cost
52
What does a concave PPC indicate?
Increasing opportunity cost
53
Why is the PPC curved in most cases?
Resources are not perfectly adaptable to all uses
54
What is productive efficiency?
Producing on the PPC curve itself
55
What is microeconomics?
The study of individual markets and agents
56
What is macroeconomics?
The study of the economy as a whole
57
What are examples of microeconomic topics?
Price of goods, demand and supply, labour markets
58
What are examples of macroeconomic topics?
Inflation, unemployment, GDP, economic growth
59
How are micro and macroeconomics linked?
Micro decisions influence macro outcomes
60
Why do economists study microeconomics?
To understand decision-making at the individual level.
61
Why do economists study macroeconomics?
To manage economic performance and policy
62
Is taxation a micro or macroeconomic issue?
Both—individual taxes (micro), total tax policy (macro)
63
Is inflation a micro or macroeconomic issue?
Macroeconomic
64
What is the main concern of macroeconomic policy?
Stability and growth of the entire economy
65
What is a market?
A system where buyers and sellers exchange goods/services
66
What is the role of price in a market economy?
To signal, ration, and incentivize
67
What is the price mechanism?
The system where prices adjust to allocate resources
68
What happens when demand exceeds supply?
Prices rise to restore equilibrium
69
What happens when supply exceeds demand?
Prices fall to restore equilibrium
70
What is demand?
The willingness and ability to buy at a given price
71
What is supply?
The willingness and ability to sell at a given price
72
What causes demand to shift?
Income, tastes, prices of other goods, expectations
73
What causes supply to shift?
Costs, technology, taxes/subsidies, expectations
74
What is equilibrium?
Where demand equals supply.
75
How does the market solve the basic economic problem?
Through price signals that guide resource allocation

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