Economics basics unit review answers
1. What is economics?
Economics is the study of how individuals, businesses, and societies allocate resources to meet their needs and wants.
2. What are the basic economic questions?
The basic economic questions are:
- What goods and services should be produced?
- How should they be produced?
- For whom should they be produced?
3. What is the difference between microeconomics and macroeconomics?
Microeconomics focuses on individual markets and specific economic actors, such as consumers and firms. Macroeconomics, on the other hand, looks at the economy as a whole, including factors like inflation, unemployment, and economic growth.
4. What is the law of demand?
The law of demand states that, all else being equal, as the price of a good or service decreases, the quantity demanded increases, and vice versa.
5. What is the law of supply?
The law of supply states that, all else being equal, as the price of a good or service increases, the quantity supplied increases, and vice versa.
6. What is the difference between a shortage and a surplus?
A shortage occurs when the quantity demanded of a good or service exceeds the quantity supplied, leading to a lack of availability. A surplus occurs when the quantity supplied of a good or service exceeds the quantity demanded.
7. What is the concept of opportunity cost?
Opportunity cost is the value of the next best alternative that is foregone when a decision is made to allocate resources to a particular choice.
8. What is the difference between a market economy and a command economy?
In a market economy, resources are allocated based on the interactions of supply and demand in the marketplace. In a command economy, resources are allocated by a central authority, such as the government.
9. What is GDP?
GDP, or Gross Domestic Product, is the total value of all goods and services produced within a country during a specific time period. It is used as a measure of a country's economic output.
10. What is inflation?
Inflation is the rate at which the general level of prices for goods and services in an economy is rising. It is often measured as an annual percentage increase in the consumer price index.