Economics Questions

What is a price ceiling? Give an example.

• a government-imposed maximum price that can be charged for a good or service, essentially setting a common example is rent control, where the government sets a maximum rent price for apartments in a certain area

• When the price of a substitute good increases, the demand for the original good also increases, meaning that consumers will tend to switch to the cheaper alternative, causing a positive shift in the demand curve for the original good; essentially, if one product becomes more expensive, people will buy more of its substitute instead

• a government-mandated minimum price that a good or service can be sold for, essentially setting a lower limit on how low a price can go; the most common example of a price floor is the minimum wage

What is the effect of substitute goods on demand?

• Substitute goods decrease demand for each other when prices change.
• Substitute goods have no effect on demand regardless of price changes.
• Substitute goods only affect supply, not demand.
• When the price of a substitute good increases, the demand for the original good also increases, meaning that consumers will tend to switch to the cheaper alternative, causing a positive shift in the demand curve for the original good; essentially, if one product becomes more expensive, people will buy more of its substitute instead

What is the effect of complementary goods on demand?

• Complementary goods decrease demand for each other.
• Complementary goods have no effect on demand.
• Complementary goods only affect supply, not demand.
• When the price of a complementary good changes, it has a directly opposite effect on the demand for its complementary good, meaning if the price of one increases, the demand for the other decreases, and vice versa; essentially, when one good becomes more expensive, the demand for the good it complements also decreases because they are typically consumed together

What are the six shifters of demand?

• 1. 1. prices of factors of production (input costs)

  2. 2. technology

  3. 3. number of sellers

  4. 4. seller expectations

  5. 5. natural events (natural disasters/strikes)

  6. 6. price of related goods

• 1. 1. income

  2. 2. prices of related goods (substitutes and complements)

  3. 3. consumer preferences

  4. 4. buyer expectations 

  5. 5. population size

  6. 6. advertising

What are the six shifters of supply?

• 1. 1. prices of factors of production (input costs)

  2. 2. technology

  3. 3. number of sellers

  4. 4. seller expectations

  5. 5. natural events (natural disasters/strikes)

  6. 6. price of related goods

• 1. 1. income

  2. 2. prices of related goods (substitutes and complements)

  3. 3. consumer preferences

  4. 4. buyer expectations 

  5. 5. population size

  6. 6. advertising

What is a free market economy?

• A free market economy is controlled by a central authority.
• A free market economy eliminates all forms of trade.
• A free market economy relies on strict government regulations.
• an economic system where the laws of supply and demand determine prices, and the government has minimal or no role in regulating the economy

What is a command economy?

• an economic system where the government controls the production and distribution of goods and services, as well as the prices of those goods and services. The government is the central planner and decision-maker

• An economic system where supply and demand dictate production.
• A market-driven economy with minimal government intervention.
• A system where private individuals own and control resources.

What is a traditional economy?

• A traditional economy is solely based on modern technology and innovation.
• A traditional economy is focused on mass production for global markets.
• A traditional economy relies on government regulations to control production.
• an economic system where the production and distribution of goods and services are primarily determined by customs, traditions, and established practices passed down through generations, often relying on subsistence farming, hunting, gathering, and bartering with little to no use of modern technology or currency; essentially, people do what their ancestors did, with roles largely dictated by family and community structure

What is a mixed market economy?

• A mixed economy is an economic system that combines private businesses with government services and regulations

• A mixed market economy is an economic system that relies entirely on barter and trade.
• A mixed market economy only allows private businesses to operate without regulation.
• A mixed market economy is solely based on government control.

What are the four periods of the business cycle?

• Surge, Decline, Rebound, Plateau
• Recession, Recovery, Stagnation, Growth
• • Peak

  • Contraction/Recession

  • Trough

  • Expansion/Recovery

• Inflation, Deflation, Stabilization, Boom