Econ Edge – Flashcards
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New technology in --- allows producers to use materials from all over the world to manufacture goods.
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Shipping
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Economic patterns help economists make forecasts, which are also called
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predictions
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How do economists use data?
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-to follow and predict unemployment rates -to explain trends in production and shipping
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A --- is a graph that shows how prices affect consumer demand
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Demand Curve
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An example of complementary goods would be
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computers and printers
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An example of a substitute good would be a
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lower-priced gallon of milk
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Which best describes a reason that consumer demand can change?
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loss of income
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Which does the law of demand do?
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-allows consumers to influence prices -allows producers to respond to consumers
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A demand curve shows how changes in
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quantity affect price
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Which best explains how the law of demand affects consumers?
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It helps consumers tell producers when prices are too high
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A factor that most influences changes in consumer demand is
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price
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According to the law of demand, as prices decrease, demand
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increases
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Supply is a powerful force in a free market. In two to three sentences, explain some of the factors that cause shifts in supply and what effects these shifts may have.
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Shifts in supply occur when the amount of goods available increases or decreases. Shifts in supply can happen when prices change, when competitors produce similar goods, or when the availability of labor or resources changes.
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+A custom furniture company has recently learned that a natural disaster has affected its oak wood supply. Because of this disaster, the furniture company has decided to produce a new line of furniture using pine, because it is more readily available.+ Based on the information presented in the scenario, which factor is affecting the supply created by the furniture company?
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ability to produce
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+In Country A, the price of wheat has increased greatly over the past year. Because of this change, farmers in Country A are planning to grow more wheat during their next growing season.+ In the sample scenario, what does this mean about the elasticity of wheat in relation to supply?
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Wheat is elastic
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A good is considered --- when producers supply more or less of it based on changing prices.
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elastic
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A good is considered --- when producers do not change how much of it is supplied when prices change
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inelastic
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What is the difference between a price floor and a price ceiling?
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A price floor is the minimum price allowed for a good. A price ceiling is the maximum price allowed for a good
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The government has set a price floor on bread. Manufacturers cannot sell loaves for less than $5.00, which is a dollar above the market price. What will most likely result from this price control?
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The demand for bread will fall, which could result in an excess supply.
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The lowest amount a manufacturer can pay factory workers is an example of
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a price floor.
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Which is an example of a product that is considered a need?
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breakfast food
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In economics, if a good is inelastic,
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its supply or demand is not sensitive to price changes
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A pair of stylish sneakers could be considered a --- because it is not a necessity.
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want
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Which calculation helps determine which producer has the absolute advantage?
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Amount produced divided by resources used
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It is better for businesses to have --- opportunity costs, as it often gives them a comparative advantage.
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lower
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Which best describes how producers benefit from specialization?
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Producers can increase their profits
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Which best describes how consumers may benefit from specialization?
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Consumers find products at lower prices
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Which of these best describes an opportunity cost?
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a trade-off
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Which best explains why producers choose to specialize?
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-to gain a comparative advantage -to increase efficiency
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--- is the act of limiting the types of goods and services produced
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specialization
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Wellness Pharmaceuticals has released a new antidepressant, Lexabuzac. Which type of monopoly does the company most likely have on this medication?
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technological monopoly
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Why is competition limited in an oligopoly?
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Barriers prevent new producers from entering the market
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Which aspect of monopolistic competition gives consumers more choice?
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Few barriers to market entry exist
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The lack of competition within a monopoly means that
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prices are uniform and do not vary.
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When an oligopoly exists, how many producers dominate the market?
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a few
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In pure competition, producers compete exclusively on the basis of
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price
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Which helps enable an oligopoly to form within a market?
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Firms cooperate to reduce competition.
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--- is the term used to describe the amount of control or influence that consumers have on a market.
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sovereignty
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Which best describes how the government sanctions technological monopolies?
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by issuing a patent for the technology
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In the United States, which type of industry is often considered part of an oligopoly?
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cell phone carriers
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Why might buying a home during a recession be a good decision for some consumers?
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-Housing prices are down. -Less demand means more options for buyers -Less demand means less competition with other buyers.
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Which indicators do economists use to determine the state of the economy?
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-prices -employment levels -gross domestic product (GDP)
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Which best describes how governments respond to changes in the business cycle?
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Governments change their policies
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During a recession, what is one way governments try to encourage growth?
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by increasing unemployment benefits
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When production is very high but demand is very low, it can lead to
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a recession
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There are five stages in a recession. 1. job loss 2. falling production 3. falling demand (occurs twice) 4. peak production In which order do these stages occur?
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4, 3, 2, 1, 3
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Which of the following conditions is most indicative of recovery?
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The economy is growing again
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Which best describes what is represented in the business cycle model?
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macroeconomic trends
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Which best describes how a recession develops as demand and production decrease?
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The recession feeds on itself.
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Stagflation occurs when high inflation combines with
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high unemployment and a low level of production.
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Which is the best definition of inflation?
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a gradual expansion in the price of goods and services
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Inflation causes money to --- its value over time
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lose
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Which scenario is an example of demand-pull inflation?
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Consumers have more money to buy cars, and the prices of cars and car parts rise as a result
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When government intervention makes currency worthless, this condition is called
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hyperinflation
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Consumers having more money to purchase computers will most likely result in
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an increase in prices for computers and computer parts.
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Which scenario is an example of cost-push inflation?
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An increase in workers' wages raises the production cost of cars, and car prices rise as a result.
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What is one consequence of stagflation?
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The economy drastically slows down as money loses its buying power
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What are the signs of high inflation?
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-Production begins to fall. -Interest rates increase -Purchasing power falls -Banks grant fewer loans.
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Hyperinflation can occur when
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the government prints more money and pushes prices up
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What is true of representative money?
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-It can be exchanged for a valuable good -It was used in systems involving a "gold standard." -It can be traded for a commodity such as silver.
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What might cause a change in the value of fiat money?
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a change in government regulations
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The term "liquidity" refers to
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how quickly money can be exchanged
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The condition of a country's --- depends on its people's ability to exchange money for goods and services.
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economy
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In the United States, dollar bills, nickels, and dimes are
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different denominations.
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Why must old currency be taken out of circulation when new currency is made?
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Too much currency in an economic system will cause inflation.
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When might it be important to know a currency's exchange rate?
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when planning expenses for an overseas trip
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What is one problem that might commonly occur when one is bartering?
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Two people have different ideas about the value of an item.
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People might choose to use a debit card rather than cash for purchases because
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they do not want to carry around large amounts of cash.
