Unit 1 Basic Economic Concepts Review

What are the 5 key Economic Assumptions?

1) Scarcity 2) Trade-off 3) Self Interest 4) Marginal costs and benefits 5) Models and Graphs

5 Shifters of Demand:

1)Tastes and Preferences 2) Number of Consumers 3) Price of Related Goods 4) Income 5) Future Expectations

What actions are in Government Involvement?

1. Price Controls 2. Import Quotas 3. Subsidies 4. Excise Taxes

6 Shifters of Supply

1. Prices/Availability of inputs(resources) 2. Number of sellers 3. Technology 4. Government action 5.Opportunity Cost of Alternative production 6. expectations of future profit

why does the Law of Demand occur?

1. the substitution effect 2.income effect 3. the Law of Diminishing Marginal Utility

What are in The Circular Flow Model?

1.Resource Market 2. Individuals 3.Product market 4. Businesses

How are Consumer surplus and Producer's Surplus different?

Consumer surplus= Buyer's Maxi - Price Producer's surplus= Price - Seller's Mini

What is the definition of Economics?

Economics is the study of choices and the study of how individuals and societies deal with scarcity.

what does the changes in price do to the graph?

It causes movement along the curve.

what is Double Shifts?

It is when two curves shift at the same time, either price or quantity will be indeterminate.

List the four factors of production.

Land, Capital, Labor, Entrepreneurs

What are the differences between Macro and Microeconomics?

Macroeconomics is the study of the economy as a whole or about subdivisions such as National Economic Growth, and microeconomics is the study of small economic units such as individual firms and industries.

Explain what the Marginal Analysis involves.

Marginal analysis involves making decisions based on the additional benefit vs. the additional cost.

What is the difference between positive and normative statements?

Positive statements are based on facts and what is, but normative statements are based on personal opinion and judgement.

What are the two types of Efficiency?

Productive Efficiency, which means products are being produced in the least costly way, and Allocative Efficeincy means the products being produced are most desired by society.

Define Supply

Quantities of a good that sellers are willing and able to see at different prices

What is the definition of scarcity?

Scarcity is the condition in which our wants are greater than our limited resources.

What is surplus and shortage?

Surplus is when the demand is less than the quantity supplied while shortage is the demand is greater than the quantity supplied.

What is the Law of Demand?

The Law of Demand states that there in an inverse relationship between price and quantity demanded.

How does the Government action effect the Supply curve?

The curve will shift to right

What are the purposes of Import Quotas?

The purpose is to protect domestic producers from a cheaper world price and to prevent domestic unemployment.

Law of Supply

There is a direct relationship between price and quantity supplied

Explain the definition of Trade-offs.

Trade-offs are all the alternatives that we give up whenever we choose one course of action over others.