Key Terms Of Economics

Question 0

Explain “supply” in the law of supply and demand

Answer 0

• How much of something is available
  1. If supply goes down
  2. and demand remains constant
  3. $ price goes up

Question 1

What is the most fundamental concept of economics?

Answer 1

The law of supply and demand

Question 2

What is an example of supply going down, demand staying the same, and price going up?

Answer 2

Fruit in season is cheaper because is grown easier and there is higher supply

• if you want fruit out of season it is more expensive b.c. It must be flown in and there is a lower supply around (scarce)

Question 3

The degree to which scarcity affects the price depends on ?

Answer 3

How necessary the item is to consumers and the availability of suitable substitutes

** sometimes ppl say a fruit is too much so they will just buy another fruit instead

Question 4

Sometimes there are no substitutes for certain products. Explain how scarcity can affect prices in those products

Answer 4

If a medication for a serious illness becomes scarce (less of it)

The price can go way up

• No other choice also

Question 5

What does scarcity mean?

Answer 5

Low supply

Question 6

What is demand?

Answer 6

How much of something people want

1. How many ppl want a thing
2. How much do they want that thing

Question 7

If demand goes down and supply stays constant, what happens?

Answer 7

Price goes down

1. Computer is out
2. Newer one hits the market
3. No1 wants old
4. Price for old goes down
   • try to still sell old a lower price

Question 8

Money is a?

Answer 8

Money is a circulating medium of exchange

** people use it

Question 9

Many original forms of money is ?

Answer 9

Commodity money

** gold pieces have inherent value

Question 10

Most modern forms of money have very little what?

Answer 10

Very little intrinsic value

Question 11

How much is the 20-dollar bill worth?

Answer 11

Few cents

** government says it is worth 20 dollars - everyone accepts

Question 12

Commodity money actually has?

Answer 12

Intrinsic Value - roughly equal to the value it represents

Question 13

What can be exchanged through a barter system?

Answer 13

Goods and Services

1. Someone who needs a cow and has a pig can trade with someone who has a pig and needs a cow
   * common in the old days

** occurs occasionally today

Question 14

Bartering services could be considered?

Answer 14

Clean my house

Ill clean your car

Question 15

WhAt is one of the values money has over a barter system?

Answer 15

Instead of needing to find a certain person that needs a good or service in exchange for your good or service you can just give them money that represents the value of something they want

Question 16

What does a nation’s supply of money consist of?

Answer 16

Currency

Bank Deposits

** a nation may also print more money

Question 17

What is currency?

Answer 17

Bills and coins in circulation

Question 18

What are bank deposits?

Answer 18

Value is held in computer system

Currency does not have to be in the bank itself

• can be re-released

Question 19

WhAt can printing too much money cause?

Answer 19

Lead to excess inflation

• can be damaging to consumers and business

Question 20

Because the government produces more money how does inflation occur and what is it?

Answer 20

The value of each unit of currency is less because there are more bills floating around/created than represented currency

Question 21

Can you buy more or less with excess inflation occurring?

Answer 21

Each unit of currency does not have as much value, therefore you can not buy as much

Question 22

What can happen with excess inflation to individuals and businesses ?

Answer 22

Devaluation of assets for individuals and businesses

Question 23

What does stock represent?

Answer 23

Stock represents

• an investment made in a company by individuals or groups, and typically represents ownership shares in that company

Question 24

Mutual funds

Answer 24

group investing in a particular investment or a variety of investments

Question 25

When you own a stock you have a?

Answer 25

• Share

- Part ownership in the company

Question 26

What are dividends paid by companies?

Answer 26

If you have a stock based on your share on ownership - you will get paid on that percentage

Question 27

What if stocks are not paid dividends?

Answer 27

All of the value is in the stock

• if you sell it you get your money

Question 28

Where are stocks (part-ownership of companies) sold and traded?

Answer 28

Stock market

Aka

Stock exchange

Several different stock markets