chapter 2

Question 1

What is economics?

Answer 1

The study of how society choose to employ resources to produce goods and services and distribute them for consumptions among various competing groups of individuals

Businesses may contribute to the economic system by inventing products that greatly increase available resources
(ex. New energy source, food growth, ways to create goods and services)
Ex. Ballard Power Systems (global leader in design development) manufactured hydro fuel cells

Question 2

2 main branches of economics

Answer 2

Micorecomins
The part of the economic study that looks at the behavior of people and organizations in particular marketers
Ex. examines how many people are hired within a particular industry or region of a country
Macroeconomics
The part of economic study that looks at the operation of a nation’s economy as a whole
Ex. looks at how many jobs exist within the whole economy

Question 3

Resource development

Answer 3

The study of how to increase resources and the creation of the conditions that will make better use of those resources
- Some economist define economics as the allocation of “scarce” resource

Question 4

Adam smith

Answer 4

Rather than believing that fixed resources had to be divided among competing groups and individuals, scottish economist Adam Smith envisioned creating more resources so that everyone could become wealthier

He wrote the book “Wealth of Nations” and it was later considered the considered the foundation of the study and understanding of newly developing capitalist industrial society

Smith believed that freedom was vital to survival of any economy, especially the freedom to own land or property and the freedom to keep profits from working the land or owning a business

If you work hard = receive economic rewards for their efforts, making them work harder
(this would make the economy prosper

Question 5

Invisible hand

Answer 5

is a phrase coined by Adam Smith to describe the process that turns self-directed gain into social and economic benefits for all

Smith assumed as people become wealthier they would reach out and help the less fortunate, but this is not always the case
This inequality is the central concern of many political religious and social leaders today

Question 6

The Giving Pledge:

Answer 6

a philanthropic incentive started by Warren Buffet and bill gates encourages the world’s wealthiest to to donate their money to individuals and families. unethical practices undermine the whole economy.

Question 7

Capitalism vs State capitalism:

Answer 7

Capitalism
also known as free market economies asks all or most factors of production to be owned by individuals and operated for profit by business people.

State capitalism:
is capitalism with some government control.

Question 8

FINCA

Answer 8

offers small loans to those being turned down by banks with micro-loans to get families to start their own businesses.

Question 9

​​Competition types: PM

Answer 9

Perfect competition
exists when there are many sellers in a market and no seller is large enough to dictate the price of a product. Under perfect competition, sellers’ products appear to be identical. E.x agriculture.

Monopolistic competition
exists when many sellers produce goods that are very similar but are perceived by buyers as different (e.g., personal computers, candy, and T-shirts) product definition is the key to success in monopolistic competition.

Question 10

oligopoly

Answer 10

occurs when a few sellers dominate a market. Oligopolies exist in industries that produce goods in the areas of oil and gas, tobacco, automobiles, aluminum, and aircraft.

Question 11

Monopoly:

Answer 11

occurs when there is only one seller for a good or service, in monopolies deregulations are made to reduce price for consumers. The North American professional sport leagues operate as a monopoly and as a result the market fails to be competitive.

Question 12

Socialism:

Answer 12

premise that some if not most businesses should be owned by the government. More taxes and smaller businesses. Soialisst acknowledge capitalist wealth creation but believe their should be a more evenly distribution of it. Tha major benefit is social inequality deflation, free education, free chilcare, free healthcare,

Question 13

Communism

Answer 13

state makes almost all economic decisions and owns all major factors of production. It also affects personal choices more than socialism does. One limitation is absolutely no knowledge of what and how much to produce because of no supply and demand reflection and face economic depression.

Canada is a mixed economy of Communism and Socialism

Question 14

​​A command economy

Answer 14

exists when the government largely decides what goods and services are produced, who gets them, and how the economy will grow.

Question 15

Free market economy:

Answer 15

goods and services produced are dependant on market, unfortunately it does not provide to the poor, disabled, and elderly.

Question 16

Three major indicators of economic conditions are - GUP

Answer 16

(1) Gross domestic product (GDP),
(2) Unemployment rate
(3) Price indexes.

Question 17

1) Gross domestic product (GDP

Answer 17

is the total value of final goods and services produced in a country in a given year.

GDP is reliant on worker productivity. The more you produce the higher the GDP. GDP rises with machinery because production becomes faster and easier.

Question 18

2) Unemployment types: FSSC

Answer 18

Frictional unemployment: quitting work because they didnt like the job,

Structural unemployment: unemployment caused by restructuring of firms

Cyclical unemployment:
recession or downturn in business cycle, this is most
serious.

Seasonal unemployment:where demand for labour varies throughout year.

Question 19

3) PRICE INDEXIES:

Answer 19

indicate health of inflation by measuring inflation, disinflation, deflation, and stagflation.

Consumer price index Consumer price index (cip) measures pace of inflation or deflation

Question 20

Inflation + the rule

Answer 20

general rise in price and services over time. “Too many dollars chasing too few goods.

The 72 rule, divide the inflation rate by 72 it will tell you in how many years inflation will double.

Question 21

Disinflation

Answer 21

describes a condition where price increases are slowing (the inflation rate is declining).

Question 22

Deflation

Answer 22

means that prices are actually declining. It occurs when countries produce so many goods that people cannot afford to buy them all.

Question 23

Stagflation

Answer 23

refers to when the economy is slowing but prices are still going up.

Question 24

Economic boom

Answer 24

business is booming jobs, growth, and economic prosperity

Question 25

Recession:

Answer 25

prices fall, people purchase less, and businesses fail

Question 26

Depression:

Answer 26

severe recession and deflation. Many cycles of recession only one real depression.

Question 27

Recovery:

Answer 27

stabilization and growth in the economy, usually leads to a boom and the cycles repeats.