Review Sheet – Unit Test on Basic Economic Concepts

Vocabulary

• Capital goods
• Consumer
• Decision making grid
• Economics
• Factors of production

o Capital

o Entrepreneurs

• Labor
• Land
• Free enterprise / free market economy

· Goods

o Durable goods

o Non-durable goods

• Inflation
• Market/marketplace

· Needs

• Opportunity cost
• Productivity
• Profit
• Scarcity

· Services

· Stock (preferred and common)

• Trade-off
• Utility

· Wants

Questions

• What are the three basic economic questions?

· What is the fundamental problem of economics?

· What does “There Is No Such Thing As A Free Lunch” mean?

· What does it mean for something to have value?

· What is the circular flow of economic activity?

o Factor market

o Product market

Economic systems (describe, identify strengths and weaknesses):

• Market economy
• Traditional economy
• Command economy

Demand

• Definition of demand
• Demand schedule
• Demand curve
• Law of demand
• Change in quantity demanded
• Change in demand
• Non-price determinants
• Substitutes
• Complements
• Diminishing marginal utility
• Demand elasticity
• Elastic
• Inelastic

Supply

• Definition of supply
• Supply schedule
• Supply curve
• Law of supply
• Change in quantity supplied
• Change in supply
• Non-price determinants
• Supply elasticity
• Elastic
• Inelastic

Essay possibilities

• Describe the difference between a factor market and a product market and explain how these markets are dependent on each other. Include a diagram in your answer.
• Compare a command economy to a market economy by listing a strength and weakness of each. State how each type of economy answers the three basic economic questions.
• List and explain three reasons for a change in consumer demand. Be sure to use examples to illustrate your answer.
• List and explain three reasons for a change in consumer supply. Be sure to use examples to illustrate your answer.

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