Basics

Question 1

What is the main problem in economics?

Answer 1

How do we deal with unlimited wants with limited resources?

Question 2

What is scarcity?

Answer 2

term to designate limited resources

Question 3

What is an opportunity cost?

Answer 3

What you lose when you make a choice based on limited resources

Question 4

What is rationality in economics?

Answer 4

Acting in your best interests. The decision made is common among other consumers

Question 5

What is an extraneous variable?

Answer 5

An outside factor that you cannot do anything about (eg climate change)

Question 6

What are the three questions of economics?

Answer 6

• What to produce
• How to produce?
• For whom to produce?

Question 7

What are the three questions of economics based on?

Answer 7

They are based on what is available

Question 8

What is absolute advantage?

Answer 8

One country makes a certain product

Question 9

What is comparative advantage?

Answer 9

Many countries that make the same product, yet some countries make it really well. The products are comparable

Question 10

What are the three types of economies?

Answer 10

Capitalist
Socialist
Marxist

Question 11

What is capitalism?

Answer 11

• Little govt involvement
• Idea of survival of the fittest
• Lower taxes
• Less public services
• Private sectors
• heavy presence of poverty
• Not a lot or no regulations on companies

Question 12

What is socialism?

Answer 12

• Some govt involvement
• Higher taxes
• More public services
• Subsidies
• Regulations on companies

Question 13

What is marxism?

Answer 13

• Communism
• Countries are not as wealthy as others
• In theory, it would be a cashless society and everyone would be wealthy
• Govt dictates life of population
• Heavy military presence

Question 14

What are the characteristics of the production possibilities theory?

Answer 14

• model based on the production of 2 products
• illustrates the opportunity cost
• operates under scarcity
• infinite ways to divide the limited resource

Question 15

What is Keynesian policy?

Answer 15

• govt is very involved to find solutions in economy
• Founded by John Maynard Keynes
• More present in Canada

Question 16

What is classical policy?

Answer 16

• laissez-faire: govt not very involved in finding solutions in economy
• Founded by Milton Friedman
• More present in the USA

Question 17

What are the 3 types of products?

Answer 17

Normal
Inferior
Giffen

Question 18

What is a normal good?

Answer 18

• 90% of products are part of this.
• When income goes up, you buy more, and vice versa (less money, less bought)
• Luxuries are part of this (vacations)

Question 19

what is a inferior good?

Answer 19

• When income rises, you buy less, and vice versa (less money, more bought)
• Don’t mean as much the more money you have
• Reduced quality
• Dollarama
• Depends on personal perspective on how you view the item
• Fast food

Question 20

What is a giffen good?

Answer 20

• Normal good
• Doesn’t work on income, but on price
• When the price goes up, you buy more

Question 21

What is necessary to be on the PP curve?

Answer 21

• best technology available
• Full employment
• Maximum efficiency