Title: Economics — LearnCoachAssist

Q: What is economics?
A: Economics is the study of how individuals, businesses, governments, and societies allocate scarce resources to satisfy unlimited wants. It examines production, distribution, and consumption of goods and services.

Q: What is scarcity?
A: Scarcity refers to the fundamental economic problem that resources are limited while human wants are unlimited, forcing choices about resource allocation.

Q: Define opportunity cost.
A: Opportunity cost is the value of the next best alternative forgone when making a choice. It highlights the trade-offs inherent in decision-making.

Q: What is the difference between positive and normative economics?
A: Positive economics describes 'what is' using facts and testable statements, while normative economics involves 'what ought to be' based on opinions and value judgments.

Q: Distinguish between microeconomics and macroeconomics.
A: Microeconomics studies individual markets, households, and firms, while macroeconomics examines the economy as a whole, including growth, inflation, and unemployment.

Q: What is a production possibility frontier (PPF)?
A: A PPF is a curve showing the maximum possible output combinations of two goods or services an economy can produce with available resources and technology. Points inside indicate inefficiency; outside are unattainable.

Q: What is the law of demand?
A: The law of demand states that, ceteris paribus, as the price of a good rises, the quantity demanded falls, illustrated by a downward-sloping demand curve.

Q: What factors shift the demand curve?
A: Changes in income, tastes, prices of related goods (substitutes/complements), expectations, or number of buyers shift the demand curve; price changes cause movement along the curve.

Q: Describe the supply curve.
A: The supply curve shows the quantity of a good producers are willing to sell at different prices, typically upward-sloping due to higher incentives at higher prices.

Q: What is the law of supply?
A: The law of supply states that, ceteris paribus, as the price of a good rises, the quantity supplied increases.

Q: What factors shift the supply curve?
A: Changes in input prices, technology, number of sellers, expectations, or government policies (taxes/subsidies) shift the supply curve; price changes cause movement along it.

Q: Define market equilibrium.
A: Market equilibrium occurs where supply equals demand, determining the equilibrium price and quantity with no shortage or surplus.

Q: What is a price ceiling?
A: A price ceiling is a legal maximum price set below equilibrium, often causing shortages as quantity demanded exceeds quantity supplied.

Q: What is a price floor?
A: A price floor is a legal minimum price set above equilibrium, often causing surpluses as quantity supplied exceeds quantity demanded, like minimum wage.

Q: What is consumer surplus?
A: Consumer surplus is the difference between what consumers are willing to pay and what they actually pay, represented by the area above the equilibrium price and below the demand curve.

Q: What is producer surplus?
A: Producer surplus is the difference between what producers receive and their minimum willingness to sell, shown by the area below the equilibrium price and above the supply curve.

Q: Define price elasticity of demand.
A: Price elasticity of demand measures responsiveness of quantity demanded to a price change: (%ΔQd / %ΔP). Elastic if >1, inelastic if <1, unit if =1.

Q: What is income elasticity of demand?
A: Income elasticity of demand measures how quantity demanded responds to income changes: positive for normal goods, negative for inferior goods.

Q: What is cross-price elasticity of demand?
A: Cross-price elasticity measures how quantity demanded of one good responds to price changes in another: positive for substitutes, negative for complements.

Q: Describe perfect competition.
A: Perfect competition features many buyers/sellers, identical products, free entry/exit, perfect information; firms are price takers earning zero economic profit long-run.

Q: What is a monopoly?
A: A monopoly is a market with one seller, high barriers to entry, price-setting power; it produces less and charges more than competitive markets.

Q: Define oligopoly.
A: An oligopoly has few interdependent sellers dominating the market, often leading to collusion or strategic behavior like price wars.

Q: What is monopolistic competition?
A: Monopolistic competition involves many firms selling differentiated products with free entry; short-run profits possible, but zero long-run economic profit.

Q: What is Gross Domestic Product (GDP)?
A: GDP measures the total market value of all final goods and services produced within a country's borders in a given period.

Q: Distinguish nominal GDP from real GDP.
A: Nominal GDP uses current prices; real GDP adjusts for inflation using base-year prices to measure actual output changes.

Q: What are the three methods to calculate GDP?
A: GDP can be calculated via expenditure (C+I+G+NX), income (wages+profits+rents+interest), or production (value added at each stage).

Q: Define unemployment rate.
A: The unemployment rate is the percentage of the labor force without jobs but actively seeking work.

Q: What are the types of unemployment?
A: Types include frictional (job transitions), structural (skill mismatches), and cyclical (economic downturns).

Q: What is the natural rate of unemployment?
A: The natural rate is frictional plus structural unemployment at full employment, excluding cyclical effects.

Q: What is inflation?
A: Inflation is a sustained increase in the general price level of goods and services over time, eroding purchasing power.

Q: Define Consumer Price Index (CPI).
A: CPI measures the average change in prices paid by urban consumers for a market basket of goods and services.

Q: What causes demand-pull inflation?
A: Demand-pull inflation occurs when aggregate demand exceeds supply, pulling prices up, often from increased spending.

Q: What is cost-push inflation?
A: Cost-push inflation arises from rising production costs (e.g., wages, oil) shifting supply left, increasing prices.

Q: Describe the Phillips curve.
A: The Phillips curve shows an inverse short-run relationship between unemployment and inflation rates.

Q: What is fiscal policy?
A: Fiscal policy involves government spending and taxation to influence the economy, managed by Congress and the executive.

Q: What is expansionary fiscal policy?
A: Expansionary fiscal policy increases spending or cuts taxes to boost aggregate demand during recessions.

Q: What is contractionary fiscal policy?
A: Contractionary fiscal policy decreases spending or raises taxes to cool an overheating economy and curb inflation.

Q: Define monetary policy.
A: Monetary policy is the central bank's actions to control money supply and interest rates to achieve goals like stable prices and full employment.

Q: What is the role of the Federal Reserve?
A: The Federal Reserve conducts U.S. monetary policy, supervises banks, maintains financial stability, and provides banking services.

Q: What are the tools of monetary policy?
A: Tools include open market operations (buy/sell bonds), discount rate, and reserve requirements to influence money supply and interest rates.

Q: What is aggregate demand (AD)?
A: Aggregate demand is total spending on goods/services at different price levels: AD = C + I + G + NX.

Q: What is aggregate supply (AS)?
A: Aggregate supply shows total output firms produce at different price levels; short-run AS slopes up, long-run is vertical.

Q: Describe business cycles.
A: Business cycles are fluctuations in economic activity: expansion, peak, contraction (recession), trough.

Q: What is comparative advantage?
A: Comparative advantage is the ability to produce a good at a lower opportunity cost than others, basis for beneficial trade.

Q: Distinguish absolute advantage from comparative.
A: Absolute advantage is producing more with same resources; comparative focuses on lower opportunity cost.

Q: What is absolute advantage?
A: Absolute advantage occurs when a country produces more of a good using the same resources than another.

Q: What determines exchange rates in floating systems?
A: In floating exchange rates, supply and demand for currencies determine value, influenced by trade, interest rates, and speculation.

Q: What are externalities?
A: Externalities are unintended side effects of production/consumption on third parties: positive (benefits) or negative (costs).

Q: What are public goods?
A: Public goods are non-excludable and non-rivalrous, like national defense; markets underprovide them, requiring government intervention.

Q: Explain the tragedy of the commons.
A: The tragedy of the commons occurs when individuals overuse shared resources (e.g., fisheries) due to no private incentives to conserve.

Q: What is marginal analysis?
A: Marginal analysis compares marginal benefits and costs of decisions; rational choices occur where MB = MC.

Q: Define utility in economics.
A: Utility measures satisfaction from consuming goods; consumers maximize it subject to budget constraints.

Q: What is diminishing marginal utility?
A: Diminishing marginal utility states that additional units of a good yield less extra satisfaction as consumption increases.