Economics

The opportunity cost of an activity is the value of the next-best alternative foregone.

What is the basic economic problem?

The basic economic problem is the scarcity of resources, which forces people to make choices about how to allocate them.

Production is the process of creating goods and services, while consumption is the use of goods and services to satisfy wants and needs.

Specialization is the concentration of production on a limited number of goods or tasks, which allows for increased efficiency and productivity.

A market is a mechanism through which buyers and sellers interact to exchange goods and services.

The price of a good or service is determined by the interaction of supply and demand in the market.

The law of demand states that, other things being equal, the quantity demanded of a good or service is inversely related to its price.

The law of supply states that, other things being equal, the quantity supplied of a good or service is directly related to its price.

Market equilibrium occurs when the quantity demanded of a good or service equals the quantity supplied, at which point the price of the good or service is stable.

Price elasticity of demand measures the responsiveness of the quantity demanded of a good or service to a change in its price.

Price elasticity of supply measures the responsiveness of the quantity supplied of a good or service to a change in its price.

Inelastic demand or supply means that the quantity demanded or supplied is relatively unresponsive to a change in price.

Elastic demand or supply means that the quantity demanded or supplied is relatively responsive to a change in price.

The elasticity of demand or supply can vary depending on the nature of the good or service, the availability of substitutes, and the time frame considered.

Market failure occurs when the market fails to allocate resources efficiently, resulting in a market outcome that is not optimal for society.

Externalities are the unintended consequences of an economic activity that affect third parties, who may not be compensated or penalized for their impact.

Positive externalities are the benefits that third parties receive from an economic activity.

Negative externalities are the costs that third parties bear from an economic activity.

The role of government in the economy is a contentious issue, with different schools of thought advocating for different levels of intervention.

Laissez-faire economics advocates for minimal government intervention in the economy, allowing market forces to operate freely.