Test 1

Question 1

What are the 3 main economic questions?

Answer 1

What? → what goods and services should/are being produced
How? → how will good or service be produced?
For whom? → who will buy or has the money to pay for good and services?

Question 2

What is production technology?

Answer 2

How productive resources such as labour and capital are used when producing goods and services

Question 3

What is the difference between macroeconomics and microeconomics?

Answer 3

Macro is the study of the behaviour of the economy as a whole, it deals with nation-wide economic phenomena. While micro studies how specific markets of industries function within the economy and how individual economic units like firms and households make production and consumption choices and determine market outcomes.

Question 4

What are standard physical tangible items?

Answer 4

Goods that are tangible meaning it can be touched. For example iPads, cameras, and running shoes.

Question 5

What is a digital good?

Answer 5

Goods that can be stored and transferred in digital form. For example recorded videos, computer software and online ads.

Question 6

What is a service

Answer 6

All intangible forms of work done for others, we can’t always see them but we enjoy the services. For example educational services, repair services, and health services

Question 7

What is the difference between goods and services?

Answer 7

Goods can be manufactured but services are done by others.

Question 8

What are the 5 types of resources or factors of production?

Answer 8

1. Natural resources or LAND → nonhuman gift of nature (forests, water, mineral or natural resources below land
2. Labour → productive contributions made by workers
3. Human capital → educational training of workers
4. Physical capital → available stocks of factories, equipment, machinery, and infrastructure
5. Entrepreneurship → Human Resources that perform the functions of risk-taking and management of other factors of production

Question 9

What are the 4 types of factor payments or income, in other words how payments are receive for resources?

Answer 9

1. Rent
2. Wages and salaries
3. Interests and dividends
4. Profit

Question 10

What is the difference between positive economics and normative economics?

Answer 10

Positive economics is analysis based on statements that can be tested or validated or invalidated by testing facts and normative economics is analysis based on judgments or personal opinions. It’s based on values and beliefs

Question 11

What is the PPC?

Answer 11

An economic model/graph that assumes the two goods or services, designed to explain economic choices facing a society

Question 12

What is the production possibility schedule?

Answer 12

All possibilities for the production combinations of 2 groups of goods.

Question 13

What are the 3 properties the PPC must have?

Answer 13

1. All combinations that are on the PPC are productively efficient meaning all available resources are being used in a way that maximizes total output of goods or services
2. All combinations outside or above the PPC are to possible due to resource scarcity, when this occurs its productively inefficient which happens when resources are not fully being utilized
3. Allocative efficiency occurs when the particular combination of goods and services most values by society gets produced. Can be based on norms, rules or preferences based on government or companies interests

Question 14

What is opportunity cost?

Answer 14

When every choice involves giving up another opportunity to do or use something. Opp cost of a choice is the value of the alternative that must be given up because of choice made.

Question 15

What is the formula for opportunity cost?

Answer 15

what we give up
______________________
What we get in return

Question 16

Is it the good whose opp cost being calculated that goes as the denominator or is it the other good thats given up

Answer 16

The good that’s being calculated is the denominator

Question 17

What is the definition of a market?

Answer 17

A place or set of rules governing the behaviours of 2 roues of economic agents (ex people, countries) in the exchange of 2 goods.

Question 18

What is the definition of market demand?

Answer 18

Quantities of a specific good or service that consumer in a particular market are willing to buy at various prices and aims to understand behaviour of buyers

Question 19

What does Ceteris Paribus mean?

Answer 19

All other factors being constant

Question 20

What is the law of demand?

Answer 20

Ceteris Paribus, meaning theres an inverse relationship between the price of a good or service and the quantity demanded. There’s a negative relationship between the price and quantity for said good or service

Question 21

1. When the price increase, demand….
2. When price decreases, demand….

Answer 21

1. Decreases
2. Increases

Question 22

What is the definition of market demand schedule?

Answer 22

A tabular representation of a market which combines price of goods that have been sold.

Question 23

What is the definition of market demand curve?

Answer 23

Graphical representation of demand

Question 24

Is market demand represented by an upward or downward slopping line?

Answer 24

A downward slopping line

Question 25

What is the definition of market supply?

Answer 25

Quantities of a specific good or service that firms are willing to sell at various prices given that other things are constant

Question 26

What is the definition of law of supply?

Answer 26

Ceteris paribus, theres a direct relashionship between the price of any good or service and quantity supplied

Question 27

What explains law of supply?

Answer 27

There’s a positive relashionship where the price of a good increases or decreases when the quantity supplied increases or decreases

Question 28

When graphing supply curve on, which axes does price and quantity have to be placed on?

Answer 28

Horizontal: quantity Vertical: price

Question 29

What is market equilibrium?

Answer 29

When the quantity demanded (Qd) is equal to the quantity supplies (Qs) so the market is stable. Qs=Qd, at particular price

Question 30

What are the two aspects/dimensions of market equilibrium?.

Answer 30

1. Market equilibrium price (P*) is equal to the quantity demanded 2. Market equilibrium quantity (Q*) traded/bought at equilibrium price

Question 31

How do you find market equilibrium based on a schedule

Answer 31

Find where both quantity demanded and quantity supplied are the same

Question 32

How do you find market equilibrium based on a graph

Answer 32

Loo at where both lines intersect

Question 33

What is market disequilibrium?

Answer 33

There’s a market disequilibrium when the quantity supplied is to equal to quantity demanded

Question 34

What are the 2 types of market disequilibrium?

Answer 34

1. Excess supply → exists when quantity supplies exceeds quantity demanded. Also called SURPLUS 2. Excess demand → exists when quantity demanded exceeds quantity supplies. Also called SHORTAGE

Question 35

What is the formula to calculate surplus?

Answer 35

Qs - Qd

Question 36

What is the formula to calculate shortage?

Answer 36

Qd - Qs

Question 37

What are the factors that cause shifts in demand?

Answer 37

- income - normal goods - inferior goods - tastes and preferences - price of related goods - complements - substitutes - expectations - future prices - future income - population/number of buyers

Question 38

1. An increase in demand causes the demand curve to shift up or down? 2. What happens when demand increases

Answer 38

1. Shift up 2. Price and quantity increases

Question 39

1. A decrease in demand causes the demand curve to shift up or down? 2. What happens when demand decreases

Answer 39

1. Down 2. Price and quantity decrease or fall

Question 40

1. An increase in supply causes the curve to shift up or down 2. What happens when supply increases?

Answer 40

1. Down 2. Price decreases ad quantity increases

Question 41

1. When supply decreases, does the curve shift up or down? 2. What happens when supply decreases?

Answer 41

1. Upward shift 2. The price increases and quantity decreases

Question 42

What are the factors tat cause shifts in supply

Answer 42

- cost of inputs - technology and productivity - number of firms in the industry - taxes and subsidies - price expectations

Question 43

How do you calculate changes in demand?

Answer 43

Increase = addition Decrease = subtraction

Question 44

How do you calculate changes in supply?

Answer 44

Increase = addition Decrease = subtraction