economic basics pretest answers

Answer 1

1. What is the basic economic problem that every society must address?
- The basic economic problem is scarcity, or the limited availability of resources to meet unlimited wants and needs.

2. Define opportunity cost.
- Opportunity cost refers to the value of the next best alternative that is foregone when making a decision.

3. What is the difference between a need and a want?
- A need is a necessity essential for survival, such as food, water, and shelter. A want, on the other hand, is a desire for something that is not necessary for survival, like luxury goods or entertainment.

4. What is the role of consumers in the economy?
- Consumers play a vital role in the economy as they are the ones who purchase goods and services, driving demand and influencing production decisions.

5. Define supply and demand.
- Supply refers to the quantity of goods or services that producers are willing to offer at a given price in a specific market. Demand refers to the quantity of goods or services that consumers are willing and able to purchase at a certain price.

6. What is the law of demand?
- The law of demand states that as the price of a good or service increases, the quantity demanded decreases, and vice versa, assuming all other factors remain constant.

7. What is the law of supply?
- The law of supply states that as the price of a good or service increases, the quantity supplied also increases, assuming all other factors remain constant.

8. Explain the concept of equilibrium.
- Equilibrium refers to a state in the market where the quantity demanded is equal to the quantity supplied, resulting in a stable price.

9. What is inflation?
- Inflation is the sustained increase in the general price level of goods and services in an economy over a period of time.

10. Define GDP (Gross Domestic Product).
- GDP is the total value of all goods and services produced within a country's borders in a specific period, usually a year.