Understanding Key Economic Concepts

Front

What role do incentives play in influencing the behavior of individuals and firms in an economic system?

Back

Incentives motivate or encourage individuals and firms to act in a certain way.

Front

What is the opportunity cost of allocating more resources to healthcare?

Back

The value of the next best alternative foregone, such as education or infrastructure.

Front

How do supply and demand interact to determine the market price of a good?

Back

The interaction between supply and demand determines the market price.

Front

What is the impact of a tariff on imported goods in an economy?

Back

It increases the price of imported goods, making them less competitive.

Front

How can a government-imposed price ceiling lead to a shortage in the market?

Back

A price ceiling set below the equilibrium price will lead to a shortage.

Front

Define 'incentives' in economics.

Back

Incentives are factors that motivate individuals and firms to make decisions.

Front

What is opportunity cost?

Back

Opportunity cost is the value of the next best alternative that is foregone when a choice is made.

Front

Explain the law of demand.

Back

The law of demand states that, all else being equal, as the price of a good decreases, the quantity demanded increases.

Front

What is a price ceiling?

Back

A price ceiling is a government-imposed limit on how high a price can be charged for a product.

Front

What is a price floor?

Back

A price floor is a government-imposed limit on how low a price can be charged for a product.