Economic Quiz Chapter 1,2,3,4 – Flashcards
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What goods and services should be produced? How should these goods and services be produced? Who consumes these goods and services?
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What are the three economic questions.
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Because economic resources are limited.
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Why are the three economic questions important?
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Market Economy, Command Economy, Traditional Economy.
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What are the tree types of economies. Be able to explain each, advantages and disadvantages, role of government, entrepreneur.
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Based on exchange and trade. The people determine what gets made and how and who. Called free market(capitalism). People and firms act in their own best interest to answer the Who, What and How questions.
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Market Economy
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Government makes all the economic decisions. No one else really has any controle. North Korea, Russia, Cuba
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Command Economy
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The allocation of scarce resources, and nearly all other economic activity, stems from ritual, habit or custom. Scarce resources.
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Traditional Economy
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When a good's price is lower, consumers will buy more of it. When the price is higher, consumers will buy less of it.
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What is the law of Demand?
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The willingness to buy something and a want for it. If you can afford to buy it or not.
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What affects demand?
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Customer Preference, Prices of related goods, Income, expectations of price range, income, consumer expectations, consumer tastes and advertising, prices of related goods.
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What shifts the demand curve?
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Dictates how drastically byers will cut back or increase their demand for a good.
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What is Elasticity?
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Availability of Substitutes, Relative Importance, Necessities Verses Luxuries,and Change over Time.
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Factors affecting Elasticity.
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Quantity of Demand/Price.
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How to determine elasticity/ be able to calculate Elasticity.
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If it is over 1
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Elastic
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If it is 1
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Unitary Elastic
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If it is under 1
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Inelastic
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Natural resources that are used to make goods and services.
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Land
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The effort that people devote to a task for which they are paid.
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Labor
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Any human made resource that is used to create other goods and services.
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Capital
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Limited quantities of resources to meet unlimited wants.
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Scarcity
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A situation in which a good or service is unavailable.
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Shortage
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The most desirable alternative given up as the result of a decision.
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Opportunity Cost
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Deciding whether to do or use one additional unit of some resource.
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Thinking on Margin
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To an economist, the alternative that is given up because of a decision.
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Cost
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The desire to own something and the ability to pay for it.
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Demand
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A table that lists the quantity of a good a person will buy at each different price.
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Demand Schedule
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