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14 Cards in this Set
- Front
- Back
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1.What is economics?
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Study of choices
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2.Why does your answer to #1 include the study of actions like triage in a war zone or my decision about which TV show to watch?
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It includes those because they are choices about how to use limited resources in the face of unlimited wants and needs
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3.Describe the differences between traditional, command and market economies. Be able to discuss in terms of the historical examples of the United States, the former Soviet Union, Ghana, the Ivory Coast and the Chinese economy.
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Market- individuals → Ex) USA, Ivory Coast, reformed Chinese economy
Traditional- traditional/ custom → Ex) Eskimos, tribes Command- government/ planning committee → Ex) USSR, Ghana |
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4.How are prices incentives? For individuals? For businesses?
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The price indicated whether the individual is willing to spend that price of that product. Prices tell businesses the profits and losses.
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5.Why is price rationing the most common method of allocating scarce resources?
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It is clear and “fair” because the people who need the certain item the most will be willing to spend more on it.
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7.How did the Soviet Union create perverse incentives?
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In a company they had to reach a certain quota to be paid, so they had no incentive to work hard. ex) Quota to make 200lbs of nails → they can make 1 200lb nail
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8.Explain why price controls tend to lead to black markets.
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Because of shortages→ (demand) people want it and are willing to buy at higher prices (Supply) selling things cheap and make profit`
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10.“Prices in a market economy are not simply numbers plucked out of the air.” Explain when a price becomes an “economic reality.”
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Price becomes and economic reality when someone is willing to pay the price for a product.
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13.Be able to discuss how the most efficient outcome occurs when the person who receives the good or service is the person who pays for the good or service
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“needs” decrease when using your own money instead of parent’s money
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16.Why do price floors create surpluses? Use a real example.
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Price floors makes an artificial equilibrium point making the original equilibrium point illegal causing more supply than demand.ex) minimum wage
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17.Why do price ceilings create shortages? Use a real example.
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Price ceilings make the original equilibrium point illegal so there is more demand than supply.
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27.What is GDP?
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Gross Domestic Product- monetary measure of the value of all final goods and services produced in a period of time. GDP = C+I+P+ (X-M)
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28.What is CPI?
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Consumer price index- measures the average change over time in price fixed group of products. (inflation)
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29.What is the Unemployment Rate?
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Measures the amount of people unemployed.
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