What role does scarcity play in business economics?

Scarcity necessitates choices about resource allocation, influencing supply and demand dynamics.

Complete the statement: The law of demand states that, all else being equal, as the price of a good increases, the quantity demanded ___ and vice versa.

Decreases

Explain how opportunity cost is relevant in decision-making processes in business.

Opportunity cost guides business decisions.

• Helps assess trade-offs.

• Informs resource allocation.

• Enhances strategic planning.

True or False: 

In a perfectly competitive market, firms have the ability to set prices above the market equilibrium.

False.

 In a perfectly competitive market, firms are price takers and cannot set prices above the market equilibrium.

Fill in the blank: 

The concept of elasticity measures the responsiveness of ___ to changes in price.

Quantity demanded or supplied

What is the significance of the production possibilities frontier (PPF) in economics?

The PPF illustrates the maximum feasible output combinations of two goods, demonstrating trade-offs and opportunity costs in resource allocation.

Riddle: 

I can increase or decrease based on shifts in market conditions, and I determine how much of a product consumers are willing to buy. 

What am I?

Price

Define the term 'marginal utility' and its importance in consumer choice theory.

Marginal utility affects consumer choices.

• Additional satisfaction from consumption.

• Guides budget allocation decisions.

• Maximizes overall consumer utility.

Complete the statement: When the supply of a product decreases, ceteris paribus, the equilibrium price ___ and the equilibrium quantity ___.

Increases; decreases

What are the primary factors affecting demand in a market?

Primary factors include consumer preferences, income levels, prices of related goods, and demographic changes.

True or False: 

An increase in consumer income always leads to an increase in the demand for inferior goods.

False. 

An increase in consumer income typically leads to a decrease in demand for inferior goods.

Riddle: 

I can be elastic or inelastic, and I reflect how much consumers are willing to change their quantity demanded with price changes. What am I?

Demand

What is the primary goal of firms in a competitive market according to business economics?

The primary goal is to maximize profit by optimizing production and minimizing costs.

Explain the concept of 'market equilibrium' and its significance in economics.

Market equilibrium occurs when the quantity supplied equals the quantity demanded, stabilizing prices and allowing for efficient resource allocation.

What is the difference between nominal and real GDP?

Nominal vs. Real GDP Explained

• Nominal GDP uses current prices.

• Real GDP adjusts for inflation.

• Real GDP shows true output.

True or False: 

A monopoly is characterized by a lack of competition and a single seller controlling the entire market.

True.

Riddle: 

I drive innovation and efficiency but can lead to market failures and inequality. What am I?

Capitalism

What factors contribute to the shift of a demand curve to the right?

Factors include an increase in consumer income, a rise in consumer preferences for the good, and a decrease in the price of complementary goods.

In business economics, the concept of opportunity cost refers to ___ when a choice is made.

The value of the next best alternative that is forgone.

A capitalist economy sees a spike in demand for electric cars. 

How will the market respond?

Firms will increase electric car production due to higher profit potential – guided by the price mechanism.