Chapter 1+2

Question 1

What are two assumptions we always make in economics?

Answer 1

People are social & people are rational

Question 2

What is economics ?

Answer 2

The study of how we as a society make decisions and use resources

Question 3

What is opportunity cost?

Answer 3

What you sacrifice by choosing one option over the other

Question 4

What are the 3 economic fallacies?

Answer 4

1.Composition: what’s good for individual doesn’t mean it’s necessarily good for society
2.Post-Hoc: because two events are related it doesn’t mean they caused each other
3.Single Causation: Single factor/person caused event

Question 5

What do you always assume with PPC curve?

Answer 5

1. Only 2 products can be produced
2. Fixed tech and resources
3. Economy at fully employment

Question 6

What are the 3 Laws?

Answer 6

1. LAW OF INCREASING RELATIVE COST: when scarcity wants more of a product, so they sacrifice another product
2. LAW OF DEMINISHING RETURNS: states outputs will increase if inputs are increased, but only up to a certain point! After this point, increasing inputs WILL NOT have profitable outputs
3. LAW OF INCREASING RETURNS TO SALE: tells us what happens when all product resources are increased at same time

Question 7

What are the factors of production? CELL

Answer 7

LABOUR, LAND, CAPITAL, ENTREPRENEURSHIP

Question 8

Why is Political Stability important?

Answer 8

It is important to an economy because it’s allows access to jobs, financial aid, housing, etc. It also attracts foreign investment from other countries. However, FULL STABILITY is NOT ALL POSITIVE. Too much stability leads to lack of innovation, advancements, etc.

Question 9

ECONOMIC SYSTEMS: What type of economy uses practices of the past to determine the answer to the 3 production questions?

Answer 9

Traditional Economy

Question 10

ECONOMIC SYSTEMS: What type of economy is centrally planned? The government has control

Answer 10

Command Economy

Question 11

ECONOMIC SYSTEMS: What type of economy’s resources are privately owned and people act in their own self interest?

Answer 11

Market Economy

Question 12

ECONOMIC SYSTEMS: What type of economy has private + state owned enterprises, and mixes best elements from all 3 tgt?

Answer 12

Mixed Market Economy

Question 13

What are the Economic Goals? FREP

Answer 13

1. REDUCED PUBLIC DEBT
2. ECONOMIC GROWTH
3. PRICE STABILITY
4. FULL EMPLOYMENT