Economics midterm unit 1&2 Review

The basic problem of economics is what?

• Scarcity
• Inflation
• Unemployment
• Abundance

What is opportunity cost?

• Opportunity cost is the same as sunk cost
• Opportunity cost is the total cost of all available options
• Opportunity cost is the value of the next best alternative that must be forgone in order to pursue a different option.
• Opportunity cost is the cost of the chosen option

The 3 economic questions:

• What goods and services will be produced?

• How will goods and services be produced?

• Who benefits from an expanding economy?

• Who will get to use the goods and services that are produced?

Command economy

• Monopoly
• Supply and demand
• Free market
• Government control

Traditional economy

• Mixed economy is a combination of market and planned economies
• Modern economy is based on supply and demand
• Command economy relies on government control
• Customs, traditions, and beliefs shape the goods and services produced.

Mixed economy

• A mixed economy is solely based on socialism.
• A mixed economy combines elements of both capitalism and socialism.
• A mixed economy is solely based on capitalism.
• A mixed economy is a type of dictatorship.

Market economy

• A market economy is an economic system where supply and demand have no influence on production decisions.

• A market economy is an economic system where prices are set by a central authority.

• A market economy is an economic system where decisions regarding investment, production, and distribution are based on supply and demand, and prices of goods and services are determined in the free market.

• A market economy is an economic system where the government controls all aspects of production and distribution.

Law of demand

• Quantity demanded decreases as price increases
• Quantity demanded increases as price increases
• Quantity demanded decreases as price decreases
• Quantity supplied decreases as price increases

Law of supply

• As the price of a good or service increases, the quantity supplied by producers increases.
• The law of supply is not related to the price of goods or services.
• The law of supply states that producers will supply more of a good or service as the price decreases.
• As the price of a good or service decreases, the quantity supplied by producers decreases.

Equilibrium point

• Point where supply exceeds demand
• Where the price is set by the government
• The highest price in the market
• Intersection of supply and demand curves