ECONOMICS FINAL EXAM REVIEW - 2

Front

What are the four factors of production?

Back

Land, Labor, Capital, Entrepreneurship

Front

What is illustrated by a Production Possibilities Curve (Frontier)? Explain how the PPC illustrates the following:

Back

The PPF is a curve that shows the maximum quantity of one good that can be produced for each possible quantity of another good produced.

Front

Explain the differences in a market, command, and mixed economy based on how they each answer the three key economic questions.

Back

Traditional economy: Decisions about resources are made by habit, custom, superstition, or religious tradition.
Command economy: Decisions are made by central planners, usually associated with the government.
Market economy: Decisions are made by business owners and consumers.

Front

What happens in each market as illustrated by the circular flow?

Back

In the Product Market, households purchase goods and services from firms, which receive money payments. In the Resource Market, firms purchase resources from households, who are paid wages, salaries, rents, and interest. Firms use these resources to produce goods and services, and households use their payments to buy goods and services.

Front

What is behavioral economics?

Back

Behavioral Economics is the branch of economics that uses ideas about decision making from psychology to explain economic behavior.

Front

What is the Law of Demand?

Back

When the price of a good goes down, the quantity demanded increases, and when the price of a good goes up, the quantity demanded decreases. This is an inverse (negative) relationship between price and quantity.

Front

The difference between a change in quantity demanded and a change in demand is:

Back

A change in quantity demanded is caused by a change in price, while a change in demand is caused by factors other than price.

Front

If a good becomes popular, what happens to demand and the demand curve?

Back

Demand will increase, demand curve shifts right.

Front

If a good becomes unpopular, what happens to demand and the demand curve?

Back

Demand will decrease, demand curve shifts left.

Front

If the number of consumers increases, what happens to demand and the demand curve?

Back

Demand increases, demand curve shifts right.