# ECONOMICS

Question 1

A market

Answer 1

where there are sellers and buyers

Question 2

products

Answer 2

= goods and services

Question 3

3 BIG TYPES of market.

Answer 3

1. Factor market
2. Goods and services market
3. Capital market

Question 4

1. FACTOR MARKETS ~ are markets for factors of production

Answer 4

FOP are things that used for producing goods and services. For example, land, labor, or capital

Question 5

vendors

Answer 5

sellers

Question 6

to produce iPhones

Answer 6

needs a lot of labor-workers. land to place
its factories. component parts from a variety of vendors. a ton of
capital-equipment to transform those to a complete sleek iPhone

Question 7

2. GOODS AND SERVICES MARKETS
   (things ready for consumption are
   considered belonging to GASM)

Answer 7

are markets for output or final goods produced by

companies (final goods).

Question 8

3. CAPITAL MARKETS
   ~ places where people who have spare money to
   invest meet with those who need money.

Answer 8

are markets for
long-term financial capital (debt and equity)
- open a business or raise capital -> the debt market to borrow or lend money
- invest money in the stock market -> the equity market. (equity=stock)

Question 9

10 principles in economics

Answer 9

PRINCIPLE 1. People face tradeoffs
PRINCIPLE 2. The cost of something is what you
give up to get it.
PRINCIPLE 3. Rational people think at the margin.
PRINCIPLE 4. People respond to incentives
PRINCIPLE 5. Trade can make everyone better off
PRINCIPLE 6. Markets are usually a good way to organize economic activity
PRINCIPLE 7: Governments Can Sometimes
Improve Market Outcomes
PRINCIPLE 8: A country’s standard of living depends on its ability to produce goods & services
PRINCIPLE 9: Prices rise when the government
prints too much money.
PRINCIPLE 10. Society faces a short-run tradeof
between inflation and unemployment

Question 10

PRINCIPLE 1. People face tradeoffs
tradeoffs (face tradeoffs in
every decision)

Answer 10

if we WANT sth, we must GIVE UP sth else
ex: Food and money do
not automatically fall from above to you. You
have to work for it. => Nothing is free and we can’t have everything at
once.
Having more money to buy stuff requires working longer hours, which leaves less time for leisure

Question 11

scare (resources)

Answer 11

limited, rare

Question 12

conspicuous

Answer 12

clearly visible

Question 13

PRINCIPLE 2. The cost of something is what you
give up to get it.
opportunity cost

Answer 13

is based off of the previous one, meaning we can’t have everything.
- the value of the action that you do not choose, when choosing between two possible options:

Question 14

opportunity cost

Answer 14

Resources are scarce.
ex: the real cost if gonna see a movie = the ticket price + the time that could have studied for your midterm.
if fail, have to pay $100 to retake the test. (not to mention stress and sorrow you have to go through)
the movie might conspicuously cost $5
@ factoring in the opportunity cost = the real price tag for a movie = more than $105

Question 15

PRINCIPLE 3. Rational people think at the margin

Answer 15

make decision based on marginal changes.
ex: pay 25k$ for a bowl of Pho -> full
next bowl -> not appear attractive, even for free
~ if you pay me to eat it, i wouldn’t eat it
=> the cost is now much higher than the benefit. it’sn’t that it’s free that makes it looks attractive. It’s the real benefit GET and the cost you incurred when you’re AT MARGIN

Question 16

incentive

Answer 16

a thing that can motivate others

Question 17

PRINCIPLE 4. People respond to incentives

Answer 17

ex: prices of apple increase -> switch to organes.
- cigarette taxes increase -> smoking falls
=> have different responses to different incentives