Keentune

Economics curriculum

8 chapters
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205 concepts
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free
Everything the adaptive question bank can teach and test in Economics, from foundations through advanced practice. Work through it in order, or start practising and let the questions find your level.
A. Foundations: scarcity, choice, and trade
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Unlimited wants against limited resources forces choice.
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The value of the single next-best alternative forgone.
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Every choice has tradeoffs; the cost is the best one given up.
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Decisions are made at the margin, not on totals.
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Unrecoverable spending is irrelevant to a forward-looking choice.
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Behavior responds to changes in cost and benefit at the margin.
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Agents choose the best available option given constraints.
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What IS vs what OUGHT to be, and why the split matters.
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Holding other things constant to isolate one relationship.
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Individual markets vs economy-wide aggregates.
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The frontier of attainable output combinations.
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On the curve is efficient; inside is not; outside is unattainable.
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Concavity comes from resources not being equally suited to both goods.
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Each extra unit costs more of the other good.
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Growth, technology and resource change move the whole frontier.
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Producing more of a good with the same resources.
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Producing at a lower opportunity cost, which drives trade.
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Specialization by comparative advantage expands consumption.
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The exchange ratio must sit between the two opportunity costs.
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Households and firms exchanging in product and factor markets.
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Land, labor, capital and entrepreneurship, and their payments.
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Market, command and mixed answers to what, how, and for whom.
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Self-interested exchange producing unintended coordination.
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Enforceable ownership as a precondition for exchange.
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Change divided by the ORIGINAL value, not the new one.
B. Demand, supply, and markets
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Quantity demanded falls as price rises, other things equal.
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Quantity supplied rises as price rises, other things equal.
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A price change moves ALONG the curve; anything else shifts it.
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Income, tastes, related-good prices, expectations, number of buyers.
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Input prices, technology, taxes and subsidies, expectations, sellers.
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Whether demand rises or falls when income rises.
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A rise in one good's price raises demand for the other.
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A rise in one good's price lowers demand for the other.
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The price where quantity demanded equals quantity supplied.
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Setting two schedules equal and solving for price and quantity.
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Prices above equilibrium leave surplus; below leaves shortage.
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Excess demand pushes price up; excess supply pushes it down.
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When both curves move, one of price or quantity is indeterminate.
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Predicting the new equilibrium from a named shock.
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A binding maximum price creates a persistent shortage.
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A binding minimum price creates a persistent surplus.
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A ceiling above or a floor below equilibrium does nothing.
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Shortage, quality decline and misallocation over time.
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Labor surplus in the standard model, and the empirical dispute.
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Illegal trade emerging around a binding control.
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Quantity limits and the price wedge they open.
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Willingness to pay minus price paid, as an area.
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Price received minus willingness to accept, as an area.
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Consumer plus producer surplus, maximized at competitive equilibrium.
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Surplus destroyed when quantity moves away from the efficient level.
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Price times quantity, and how it moves with elasticity.
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Horizontal summation of individual demand curves.
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A shock in one market propagating through substitutes and inputs.
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Expected future prices shifting current supply and demand.
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Price, queue, lottery and administrative rationing compared.
C. Elasticity and consumer choice
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Percentage change in quantity over percentage change in price.
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The unit-elastic boundary and what each side means.
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Averaging base values so elasticity is direction-independent.
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Substitutes, necessity, budget share, and time horizon.
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Price rises raise revenue only where demand is inelastic.
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Quantity fixed regardless of price; a vertical curve.
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Any price rise drops quantity to zero; a horizontal curve.
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A straight-line demand curve has varying elasticity.
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Sign identifies substitutes (positive) and complements (negative).
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Sign identifies normal (positive) and inferior (negative) goods.
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Responsiveness of quantity supplied, and its time dependence.
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The less elastic side of the market bears more of the tax.
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Who writes the cheque is not who bears the burden.
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Satisfaction as the objective consumers are modelled as maximizing.
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The added satisfaction from one more unit.
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Each successive unit adds less than the one before.
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Equalize marginal utility per dollar across goods.
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The affordable set given prices and income.
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Decomposing the response to a price change.
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Framing, defaults and loss aversion violating the standard model.
D. Production, cost, and market structure
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Out-of-pocket vs forgone alternatives.
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Economic profit subtracts implicit costs too.
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Zero economic profit is a normal return, not failure.
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What does and does not change with output in the short run.
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Whether at least one input is fixed.
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The three cost curves and their arithmetic relations.
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Marginal cost cuts average cost at its minimum.
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Added variable input eventually yields smaller increments.
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Long-run average cost falling as scale rises.
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Coordination costs raising long-run average cost.
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The output at which long-run average cost stops falling.
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Produce where marginal revenue equals marginal cost.
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Shut down in the short run if price is below average variable cost.
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Exit in the long run if price is below average total cost.
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Many firms, identical product, free entry, price takers.
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A horizontal demand curve at the market price.
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The allocative-efficiency condition under competition.
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Free entry competing economic profit away.
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One seller, no close substitutes, barriers to entry.
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Natural, legal, resource and strategic barriers.
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Output restricted and price raised relative to competition.
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The surplus destroyed by restricted output.
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Declining average cost making one producer cheapest.
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Charging different prices by willingness to pay, and its conditions.
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Many firms, differentiated products, free entry.
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Advertising and design creating downward-sloping firm demand.
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Few firms whose decisions are strategically interdependent.
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Joint output restriction and its instability.
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Dominant strategies and the prisoner's dilemma in market terms.
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Efficiency, profit and entry across the four structures.
E. Market failure and the role of government
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When unregulated markets fail to reach an efficient allocation.
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Costs imposed on third parties, so the good is overproduced.
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Benefits to third parties, so the good is underproduced.
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The wedge that makes the market quantity inefficient.
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A tax equal to marginal external cost restoring efficiency.
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Paying for the benefit third parties receive.
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Bargaining can internalize externalities when rights are clear and costs low.
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Capping quantity and letting price emerge from trade.
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Mandating technology vs pricing the harm.
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Non-rival and non-excludable, so private supply undershoots.
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Why voluntary contributions underfund public goods.
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Rival but non-excludable, and the tragedy of the commons.
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Excludable but non-rival, and the pricing problem they pose.
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One side knowing more, and the trades that fail as a result.
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Hidden characteristics driving good risks out of a market.
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Hidden action changing behavior once insured.
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Costly signals and contract design as responses to asymmetry.
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Per-unit tax times the post-tax quantity.
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The triangle set by the tax and the quantity it destroys.
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How the average rate moves with income.
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The rate on the next dollar vs on all dollars.
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Preventing market power from destroying surplus.
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Lorenz curve and the Gini coefficient.
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Redistribution that shrinks the pie it divides.
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Why intervention can also miss the efficient outcome.
F. Macroeconomic measurement
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Market value of final goods and services produced domestically.
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Consumption plus investment plus government plus net exports.
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Summing factor incomes to the same total.
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Used goods, intermediate goods, transfers and financial transactions.
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Household production, informal activity, distribution and wellbeing.
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Production within borders vs production by nationals.
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Current prices vs a fixed base-year price level.
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Nominal over real times 100, covering all domestic output.
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Deflating a nominal series by an index over 100.
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Output per person as a living-standards proxy.
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Expansion, peak, contraction and trough.
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The conventional two-quarter rule and the official dating process.
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Actual minus potential output, and what each sign implies.
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A fixed-basket measure of the price level.
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Index change over the earlier index, times 100.
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Substitution, quality and new-goods bias overstating inflation.
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Excluding food and energy to see the underlying trend.
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Aggregate demand outrunning capacity.
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Input-cost shocks raising the price level and cutting output.
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Menu costs, shoe-leather costs and arbitrary redistribution.
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Falling prices raising real debt and delaying spending.
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The Fisher relation between the two rates.
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Unemployed over labor force, not over population.
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Labor force over working-age population.
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Frictional, structural, cyclical, and the natural rate.
G. Money, banking, and monetary policy
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Medium of exchange, unit of account, store of value.
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Intrinsic value vs value by legal designation and confidence.
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The narrow and broad aggregates and what each includes.
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How quickly an asset converts to a means of payment without loss.
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Banks lending out deposits and creating money.
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Reserves and loans as assets; deposits as liabilities.
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One over the reserve ratio, and why the realized figure is smaller.
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The mandated fraction of deposits held as reserves.
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Price stability and maximum employment as statutory goals.
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Buying securities to add reserves; selling to drain them.
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The short-term rate the central bank targets.
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Lending to banks as a liquidity backstop.
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Paying on reserves as a floor for the policy rate.
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Large-scale asset purchases when the policy rate is at its floor.
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Which direction each tool is moved and why.
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Money supply and demand determining the interest rate.
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Transaction, precautionary and speculative motives.
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Prices and yields move in opposite directions.
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Term structure of rates and what an inversion has signalled.
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Rates to investment and consumption to output and prices.
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Money times velocity equals price level times output.
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How often a unit of money is spent in a period.
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Recognition, decision and impact lags limiting fine-tuning.
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Insulating monetary policy from short-run fiscal pressure.
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Expectations feeding into wage and price setting.
H. Stabilization, growth, and the open economy
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Total planned spending at each price level, and its components.
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Changes in consumption, investment, government or net exports.
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Upward sloping because some prices and wages are sticky.
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Vertical at potential output, set by real factors.
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Where aggregate demand meets short-run aggregate supply.
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Output below potential, with cyclical unemployment.
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Output above potential, with rising price pressure.
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Wage and price adjustment returning output to potential.
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Adverse shocks raising prices and cutting output at once.
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Government spending and taxation as demand-management levers.
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One over one minus the marginal propensity to consume.
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Smaller than the spending multiplier, and why.
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Transfers and progressive taxes damping the cycle without legislation.
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Government borrowing raising rates and displacing private investment.
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A flow per period vs the accumulated stock.
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Why the ratio, not the level, is the sustainability measure.
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The short-run inflation-unemployment tradeoff.
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Vertical at the natural rate; no permanent tradeoff.
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Physical capital, human capital, technology and institutions.
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Output per hour as the long-run driver of living standards.
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Currency supply and demand in the foreign-exchange market.
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What each does to export and import prices.
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Pegging a currency vs letting the market set it.
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Current account and financial account as mirror images.
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Domestic price rises, and who gains and loses.
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