Economics Flashcards
What is the Consumer Price Index (CPI)
How Canada measures inflation and is calculated based on a basket of goods and services that Canadians typically buy, such as food, housing, transportation, furniture, clothing, recreation and other items
What is public debt
Total debt owed to individuals, businesses and investors, in Canada the public debt is the total debt held by the federal, provincial, territorial and local government accumulated from borrowing interest rates on those borrowings.
What is GDP
The market value of all final goods and services produced in a country during a time period
What is the GDP Ratio and what is the formula
Ratio to manage and access public debt helps to understand a country’s ability to pay back its debts and generally a lower debt to GDP ratio is ideal as it signals a country is producing more than it owes, placing it on a strong financial footing and is considered stable.
Debt to GDP = Total Debt of a country / Total GDP of a country
Explain inflation and deflation
Stable prices generally indicate that an economy is healthy. On the other hand, inflation (a general rise in prices) and deflation (a general fall in prices) are symptoms of an unhealthy economy.
What is Opportunity Cost
The potential benefits that an individual, investor, or business misses out on when choosing one alternative over another. For example Jenny has a choice between spending $20 on a movie or $10 on a book, if Jenny goes to the movies, the opportunity cost is two books ($20/$10=2)
What is the formula for opportunity cost
Opportunity Cost = What one can sacrifice / what one can gain
What is the Equilibrium Point and give an example
When buyers and sellers can agree on a price of a product or service, normally in the middle but there can be wide fluctuations. For example, when negotiating for shoes a buyer and a seller will agree in the middle for the price of the shoes to be bought
What is the quantity demand
Is the actual amount of a good or service consumers are willing and able to buy at a specific price. For example, at the price of $5 per hot dog, consumers buy two hot dogs per day; the quantity demanded is two. If vendors decide to increase the price of a hot dog to $6, then consumers only purchase one hot dog per day.
What is the substitution effect
As the price of the good rises, we tend to substitute similar goods for it, if possible. For example, if beef prices rise consumers could respond by purchasing more turkey or chicken.
What is the Income Effect
As the price of the good rises, buyers must pay more to receive the same amount. As a result, their real income (purchasing power) has declined, and they buy less, decreasing the quantity demanded. Conversely, if the price of the good falls, buyers can buy the same amount for a lower price. This increases their real income (purchasing power), and they buy more, thereby increasing the quantity demanded
What is purchasing power
Expresses money’s value (currency) by how many goods or services you can buy, in investment terms it refers to the credit available to a customer based on the existing marginable securities in the customer’s brokerage account. For example, if you want to live cheap, and can move to any country in the world, compare prices of a Big Mac to find the cheapest option
What are the 5 basic changes that can take place in customer demand for a normal product
- Income
- Population
- Taste and preferences
- Expectations
- Substitute goods and complementary goods
What are Complementary goods
These are items that once sold create demand for other goods. Such goods are known as complementary goods (complements). Complements are usually goods that in some sense are consumed together : computers and software, coffee and croissants, cars and gasoline.
What are 5 basic changes that can take place in customer demand for a normal product
- Changes in input prices/production costs
- Number of sellers/producers
- Technology
- Changes in expectation
- Prices of related outputs
