MODULE 1 ECONOMICS REVIEW 1.01 Scarcity, Opportunity Cost, and Incentives 1. What is economics? 2. What does it mean when people say that resources are scarce? 3. What is a shortage? 4. How is a shortage different from scarcity? 5. What is opportunity cost? Provide an example. 6. What is an incentive? Provide an example. 7. Why are incentives and opportunity cost important when you make a decision? 8. What does it mean to “think at the margin?” Provide an example. 1.02 Factors of Production; Comparative Advantage 1. What are resources? 2. Describe the economic term land. 3. Describe the economic term labor. 4. Describe the economic term capital. 5. What is the difference between physical capital and human capital? 6. What is an entrepreneur and why are they important in an economy? 7. What does it mean to specialize? 8. Why should an individual or business specialize? 9. Define the law of comparative advantage. 10. Why would it be beneficial to know one’s comparative advantage? 1.03 Circular Flow Model: Market Interactions 1. Who participates in a market? 2. Describe the factor market? (Who does what? Where? ) 3. Describe the product market? (Who does what? Where? ) 4. Describe physical flow through the market. 5. Describe monetary flow through the market. 6. Why do households and businesses trade with each other? 7. Explain how the government participates in the flow of the market. 8. Describe the role of financial institutions in the flow of the market. 9. Describe the circular flow diagram including the government and institutions. MODULE 1 ECONOMICS REVIEW 1.05 Demand 1. Define demand. 2. Define the law of demand. 3. Why do spending habits change according to the law of demand? 4. Define the income effect. 5. Define the substitution effect. 6. What does the demand curve illustrate? 7. What does ceteris peribus mean? Why does it matter in economics? 8. What causes a change in quantity demanded? 9. Define normal goods. 10. Define inferior goods. 11. How is the demand for normal and inferior goods effected by changes to income? 12. How is demand effected by changes of consumer expectations? 13. How do tastes and preferences effect our demand? 14. Define complimentary goods. 15. Define substitute goods. 1.06 Supply 1. Define supply. 2. Define the law of supply. 3. What else must a producer consider besides the sale price of a product? 4. Define profits. 5. What do you create when you graph a supply schedule? 6. What does the supply curve illustrate? 7. How does a change in the cost of production effect supply? 8. How does the number of sellers in the market effect supply? 9. Define excise taxes. 10. Define subsidies. 11. How does government intervention effect supply? 12. How does the price of other goods effect supply? 13. How do price expectations effect supply? MODULE 1 ECONOMICS REVIEW 1.07 Equilibrium 1. Define equilibrium. 2. Why is equilibrium important? 3. What causes equilibrium to change? 4. Define disequilibrium. 5. Define surplus. 6. How are surplus and shortages different? 7. Define the invisible hand principle. 8. Define price ceilings. 9. What problems do price ceilings cause? 10. Define price floors. 11. What problems do price floors cause? .