Chapter 1 Flashcards
1
Q
Reward of capital
A
interest
2
Q
Economic problem
A
wants are unlimited
resources are limited
facing problem of scarcity
choice has to be made involving opp cost
3
Q
Factors affecting labor mobility
A
- family ties
- cost of living
- lack of info
4
Q
DONT FORGET TO ADD WHAT MICROECONOMIC THEORIES PPC CAN REPRESENT
A
-
5
Q
Market economy
A
- relies on market forces(S&D)
- no gov interference
- private sector
- main motive of profit max
6
Q
Planned economy
A
relies on public sector to allocate resources
7
Q
Mixed economy
A
- mix of both market & planned
- some owned by private with profit max motive
- some owned by public with public welfare motive
8
Q
How are resources allocated in a market economy?
A
- by price mechanism
- as D inc
- prices inc
- signal producers that profit for product will inc
- firms inc output
- hire more FoP
9
Q
Adv of market economy
A
- efficiency
- incentive to work hard
- inc EG
- consumer sovereignty
- improvement in quality & variety
10
Q
Disadv of market economy
A
- ignore social cost & benefit
- monopoly may occur
- lack of production of public goods
- inc external costs
- inc income inequality
- overproduction of demerit goods
11
Q
Extension of D
A
inc in qD due to change in price
