EOC Review Part 1

Factors of Production: Externality Demand Supply Opportunity Cost The cost of the next best alternative use of money, time, or resources when one choice is made rather than another. Factors of Production: Land, Labor, Capital, and Entrepreneurs Externality Economic side effect that affects an uninvolved third party. Demand Combination of desire, ability, and willingness to buy a product. Supply Amount of product offered for sale at all possible prices in a market

Equilibrium Price Elasticity Price Controls Price where quantity supplied equals quantity demanded; price that clears the market. Elasticity The amount that a products demand or supply will change in result to an increase in price. Price Controls Attempts from government or outside agencies to effect the market price on a product. By either establishing price ceilings or price floors.

What is scarcity and how does it differ from shortage? Scarcity is the inability to meet the unlimited wants and needs of a population, shortage is when quantity demanded is higher than quantity supplied. Shortage is temporary scarcity is permanent.

How does opportunity cost help people to determine the true cost of a decision? By helping us to evaluate what we give up by making any decision with our time, money and resources. Example: When a student get a job after school, they are giving up the chance to study, play sports, or hang out with friend in order to work.

What are the categories of resources/ factors of production? Land: Gifts of nature, or the natural resources need in production Labor: Workers needed in production. Capital: The tools needed in production; tools, money, etc. Entrepreneurs: The people with the profit motive to produce a certain product.

How do externalities encourage/ discourage decisions that we make? Externalizes encourage/discourage the decision by looking at the effect our decision has on a third party.

How do the four economic systems distribute goods and services? Command Economy Economic system in which the government answer the three basic economic questions. Market Economy Economic system in which the market answers the three basic economic questions. Mixed Economy Economic system that contains elements of a market economy, command economy, and a traditional economy. Traditional Economy Economic system in which the three basic questions are answered by traditions.

How are demand and quantity demanded different? Demand is the overall willingness and ability to purchase a product; quantity demanded the amount of product will be demanded at a specific price.

What causes the demand curve and quantity demanded to shift. Substitution effect Consumer Income Consumer Taste Substitutes Complements Expectation Number of Consumers.

How are supply and quantity supplied different? Supply is the amount of a product that is being offered; quantity supplied the amount of product will be demanded at a specific price.

What causes supply and quantity supplied to shift? Cost of Resources Productivity Technology Taxes and Subsidies Expectations Government Regulations Number of Sellers

How does governmental intervention affect supply in the market? By increasing subsidies to grow encourage a products supply to grow. Also stricter or looser regulation on production can also encourage a growth in product supply.