All Flashcards
What are the differences between absolute and comparative advantage?
Absolute advantage is producing more with the same resources; comparative advantage is producing at a lower opportunity cost.
Differentiate between a change in demand and a change in quantity demanded.
Change in demand is a shift of the entire curve; change in quantity demanded is a movement along the curve due to a price change.
Differentiate between a change in supply and a change in quantity supplied.
Change in supply is a shift of the entire curve; change in quantity supplied is a movement along the curve due to a price change.
What is the difference between microeconomics and macroeconomics?
Microeconomics studies individual decisions; macroeconomics studies the economy as a whole.
What is the difference between positive and normative economics?
Positive economics is objective and fact-based; normative economics is subjective and value-based.
Compare and contrast a market economy and a command economy.
Market economy relies on supply and demand; command economy relies on central planning.
What are the differences between short-run and long-run in economics?
Short-run has fixed factors of production; long-run allows all factors to vary.
Compare and contrast efficiency and equity in economics.
Efficiency is optimal resource allocation; equity is fairness in distribution.
What is the difference between consumer goods and capital goods?
Consumer goods satisfy immediate wants; capital goods are used to produce other goods.
Compare and contrast economic growth and economic development.
Economic growth is an increase in output; economic development is broader improvement in living standards.
Analyze a PPC showing trade-offs between consumer and capital goods.
Movement along the PPC shows the opportunity cost of producing more of one type of good versus the other.
Analyze a supply and demand graph showing a surplus.
Surplus indicates that the price is above equilibrium, leading to excess supply.
Analyze a supply and demand graph showing a shortage.
Shortage indicates that the price is below equilibrium, leading to excess demand.
What does a point inside the PPC indicate?
Inefficient use of resources or unemployment.
What does a point outside the PPC indicate?
Currently unattainable with existing resources and technology.
How does a shift in the demand curve affect equilibrium price and quantity?
A rightward shift increases both equilibrium price and quantity; a leftward shift decreases both.
How does a shift in the supply curve affect equilibrium price and quantity?
A rightward shift decreases equilibrium price and increases quantity; a leftward shift increases price and decreases quantity.
What does a bowed-out PPC indicate?
Increasing opportunity costs as production shifts from one good to another.
What does a straight-line PPC indicate?
Constant opportunity costs as production shifts from one good to another.
How does technological advancement affect the PPC?
It shifts the PPC outward, allowing for greater production of both goods.
What is scarcity?
Unlimited wants but limited resources.
Define opportunity cost.
The value of the next best alternative foregone.
What is a Production Possibilities Curve (PPC)?
A graph showing maximum combinations of goods/services an economy can produce.
What is comparative advantage?
Ability to produce a good at a lower opportunity cost than competitors.
Define Demand.
The quantity of a good consumers are willing to buy.
What is Supply?
The quantity of a good producers are willing to offer.
Define Equilibrium.
The point where quantity supplied equals quantity demanded.
What is economics?
The study of how we allocate limited resources to satisfy unlimited wants and needs.
What is laissez-faire?
A system where markets allocate resources perfectly without intervention.
What are markets?
Places (physical or virtual) where buyers and sellers interact to exchange goods or services.