What is scarcity in economics?
Scarcity is the central economic problem from limited resources versus human wants.
What are economic resources also called?
Economic resources are also called factors of production.
Which items are included as economic resources?
Labour, land and raw materials, and capital are economic resources.
What do economists study to understand markets?
Economists study demand and supply and their reconciliation in markets.
What does actual demand and supply refer to?
Actual demand and supply refer to currently realised market quantities.
What does potential demand and supply refer to?
Potential demand and supply refer to possible quantities that could arise.
What issues are included in macroeconomics?
Growth, recessions, unemployment, inflation, balance of trade, and cyclical fluctuations.
Which events exemplify recession-related economic effects?
The 2008–9 financial crisis and the Covid-19 pandemic.
What are the two main types of macroeconomic policy?
Demand-side policy and supply-side policy.
What is the definition of opportunity cost?
The cost associated with choices made when resources are scarce.
When should rational economic decision making increase activity?
When marginal cost is less than marginal benefit.
When should rational economic decision making decrease activity?
When marginal cost is greater than marginal benefit.
What are the main microeconomic objectives?
Efficiency and equity.
What choices does microeconomic analysis consider?
What to produce, how to produce, for whom to produce, and social implications of choice.
What does the production possibility curve show in an economy?
It shows the production choices available to an economy.
How does the production possibility curve link microeconomics to opportunity cost?
It links microeconomic choices to opportunity cost.
What economic concepts does the production possibility curve illustrate?
It illustrates choices and opportunity cost, including increasing opportunity cost.
What does production inside the production possibility curve represent in macroeconomics?
Production below the economy's possible capacity.
What do shifts in the production possibility curve represent?
Changes in the production possibilities available to the economy.
What does the circular flow of income model?
Interactions between firms and households through goods and factor markets.
What is the real flow in goods markets?
Goods and services.
What is the money flow in goods markets?
Consumer expenditure.
What is the real flow in factor markets?
Services of labour and other factors.
What is the money flow in factor markets?
Wages and other incomes.
Who participates in both goods and factor markets in the circular flow?
Firms and households.
What does macroeconomic analysis of the circular flow examine?
The size of total flows.
What does microeconomic analysis of the circular flow examine?
Individual markets and choices within goods and factor markets.
Test your knowledge with 13 questions on Introduction to Economics and Finance.
1. What is the central economic problem created by resources being limited relative to human wants?
2. Which set contains the main categories of economic resources, also called factors of production?
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