Economics 1001C Essay Question Chapters 1-4
Command System
Heavily government-controlled A socialist or Communist system where the government has control of most or all property resources.
Market System
A capitalist economic system where it is defined by the private ownership of capital and communicates through prices and directs economic activity through markets.
complementary good
A product or service that adds value to another product or service.
Inferior Good
A product that if the income of a customer increases, the demand for that good decreaes, but if the income of a customer decreases, the demand increases.
Scarcity
A situation in which unlimited wants exceed the limited resources available to fulfill those wants
Positive Economics Statement
A statement about the economy that has facts to back it up.
Normative Economics Statement
A statement about the economy that is more opinion based.
Freedom of Choice
Allows owners to collect or get rid of their property and money if it is necessary for their business.
Transaction
An exchange between people for goods and services.
Laissez-faire government
Capitalist economy where the government can only protect private property and establishes an environment appropriate to the operation of the market system.
Decide whether each of the following descriptions must closely correspond to being part of a command system, a market system, or a laissez-faire system. A woman who wants to start a flower shop finds she cannot do so unless the central government has already decided to allow a flower shop in her area.
Command System, heavily government-controlled
For each of the following situations involving marginal cost (MC) and marginal benefit (MB), indicate whether it would be best to produce more, fewer, or the current number of units. 43,277 units at which MC = $99 and MB = $99
Current number of units since they are the same
What effect will each of the following have on the demand for small automobiles such as the Mini-Cooper and Fiat 500? Income declines and small autos are an inferior good.
Demand for the small automobile increases
What effect will each of the following have on the demand for small automobiles such as the Mini-Cooper and Fiat 500? Consumers anticipate that the price of small autos will greatly come down shortly.
Demand will decrease for the smaller automobile
What effect will each of the following have on the demand for small automobiles such as the Mini-Cooper and Fiat 500? If small automobiles become more fashionable
Demand will increase since no one else has that design so it is low in supply.
What effect will each of the following have on the demand for small automobiles such as the Mini-Cooper and Fiat 500? The price of gasoline substantially drops.
Demand will increase, but not by much since it is a complementary good
For each of the following situations involving marginal cost (MC) and marginal benefit (MB), indicate whether it would be best to produce more, fewer, or the current number of units. 5 units at which MB < MC
Fewer units since the marginal benefit is less than the marginal cost.
Decide whether each of the following descriptions must closely correspond to being part of a command system, a market system, or a laissez-faire system. The only taxes levied by the government are to pay for national defense, law enforcement, and a legal system designed to enforce contracts between private citizens.
Laizzez-faire
Freedom of Enterprise
Makes sure that entrepreneurs and private businesses can have and use economic resources to make whichever goods and services they decide on, and sell them to any market that works best for them.
Decide whether each of the following descriptions must closely correspond to being part of a command system, a market system, or a laissez-faire system. Shops stock and sell the goods their customers want but the government levies a sales tax on each transaction to fund elementary schools, public libraries, and welfare programs for the poor.
Market System
For each of the following situations involving marginal cost (MC) and marginal benefit (MB), indicate whether it would be best to produce more, fewer, or the current number of units. 82 Units at which MC < MB
More units since MB is lower than the MC
For each of the following situations involving marginal cost (MC) and marginal benefit (MB), indicate whether it would be best to produce more, fewer, or the current number of units. 3,000 units at which MC = $10 and MB = $13
More units since the marginal cost is $3 less than the marginal benefit
Property Resources
Natural Resoures that are owned and managed by society rather than indivduals.
or the economy to get better quicker at that time, the government should not have closed businesses so people can buy more goods to put money into the country. Normative or Positive Economic Statement
Normative
Coronavirus-19 was a huge factor in the change in America's economy in 2020 because its Gross Domestic Production fell by 8.9% once the virus started to spread frequently. Is this a positive or normative economic statement?
Positive
For each of the following situations involving marginal cost (MC) and marginal benefit (MB), indicate whether it would be best to produce more, fewer, or the current number of units. 11 units at which MC = $4 and MB = $3
Produce fewer units since the marginal cost is $1 less than the marginal benefit.
Gross Domestic Production
Shows the amount of money for goods and services produced by the country in a year.
Entrepreneur
Someone who tries to take advantage of their profit or tries to make their loss not seem as bad as it.
Mutually Agreeable
Something that is acepted by two or more people or groups. Only economic transaction that takes place in the market system
Self-Interest
The motivating force of the different economic units as they express their freedom of choice.
Supply and Demand
The relationships between the quantities of a product and the desire for that product.
What effect will each of the following have on the demand for small automobiles such as the Mini-Cooper and Fiat 500? The price of large automobiles rises (with the price of small autos remaining the same).
The smaller automobile will be high in demand since it is cheaper and Scarcity will be on its side.
Suppose that the demand and supply schedules for rental apartments in the city of Gothan are as given in the following table. Monthly Rent Apartments Demanded Apartments Supplied $2,500 10,000 15,000 2,000 12,500 12,500 1,500 15,000 10,000 1,000 17,500 7,500 500 20,000 5,000 If the local government can enforce a rent-control law that sets the maximum monthly rent at $1,500, will there be a surplus or a shortage? Of how many units? And how many units will be rented each month?
There will be a shortage of 5,000 apartments since the supplies are greater than the demands. there are 10,000 rented units
Suppose that the demand and supply schedules for rental apartments in the city of Gothan are as given in the following table. Monthly Rent Apartments Demanded Apartments Supplied $2,500 10,000 15,000 2,000 12,500 12,500 1,500 15,000 10,000 1,000 17,500 7,500 500 20,000 5,000 Suppose that a new government is elected that wants to keep out the poor. It declares that the minimum rent that can be charged is $2,500 per month. If the government can enforce that price floor, will there be a surplus or a shortage? Of how many units? And how many units will actually be rented each month?
There will be a surplus of 5,000 apartments and 10,000 rented.
Suppose that the demand and supply schedules for rental apartments in the city of Gothan are as given in the following table. Monthly Rent Apartments Demanded Apartments Supplied $2,500 10,000 15,000 2,000 12,500 12,500 1,500 15,000 10,000 1,000 17,500 7,500 500 20,000 5,000 Suppose that the government wishes to decrease the market equilibrium monthly rent by increasing the supply of housing would the government have to increase the supply of housing in order to get the market equilibrium rental price to fall to $1,500 per month? To $1,000 per month? To $500 per month?
They would have to increase the amount of buildings. At $1,500, there must be 5,000 more apartments made to match the demand of 15,000 apartments. At $1,000, there must be 10,000 more apartments made to match the demand for 17,500 apartments. At $500, there must be 15,000 more apartments made to match the demand of 20,000 apartments.
What is the goal of a market system?
To have a competitive environment between all businesses.
Optimal Mix
Used to increase the potential unit deals while it stays on track with an organization's profit.
Production possibilities curve
What shows the possible ways that output can be produced regarding what resources they have.
Competition
What the market system relies on so we can run businesses without a bigger company making it impossible to make a profit. Requires two or more buyers and two or more sellers who act in a particular product or resource market.
Economic Activity
When businesses make decisions such as knowing when to make more of a product or service, or to have less of one.
Suppose that the demand and supply schedules for rental apartments in the city of Gothan are as given in the following table. Monthly Rent Apartments Demanded Apartments Supplied $2,500 10,000 15,000 2,000 12,500 12,500 1,500 15,000 10,000 1,000 17,500 7,500 500 20,000 5,000 What is the market equilibrium rental price per month and the market equilibrium number of apartments demanded and supplied?
When the monthly rent is at $2,000 since the demand and the apartments supplied are equal at 12,500.
Monopoly
When there is one seller in a market
Market
Where consumers and sellers buy goods, services and resources
Private Property
Where properties such as homes, businesses, or cars are owned by anyone or anything besides the government. It is a characteristic of the market system; the right of private property,
Marginal
additional
marginal analysis
analysis that involves comparing marginal benefits and marginal costse which could end up in a marginal or extra charge
Extra Cost
not included in the basic cost
Right of Private Property
right to negotiate binding legal contracts allows citizens and establishments to get rid of whatever property resources they want.
Marginal Benefit
the additional benefit to a consumer from consuming one more unit of a good or service
Marginal Cost
the cost of producing one more unit of a good
