Economics Basics — Answer Key
Part A: Multiple Choice
Circle the best answer for each question.
1. A bakery makes one hundred muffins but only ten people want them. What will most likely happen to the price?
A) The price will go up.
B) The price will go down.
C) The muffins will become a service.
D) The bakery will close forever.
When supply is much bigger than demand, sellers have to lower prices to get people interested. The bakery would cut the price so the extra muffins can sell.
2. Mia has eight dollars. She buys a notebook for five dollars and saves the rest. How much does she save?
A) Eight dollars.
B) Five dollars.
C) Three dollars.
D) Zero dollars.
Subtract what she spent from what she had: 8 − 5 = 3. Mia puts the leftover three dollars into savings.
3. Which of these is a need rather than a want?
A) A comic book.
B) A pair of roller skates.
C) Drinking water.
D) A board game.
People cannot survive long without drinking water — it keeps the body alive and healthy. That makes water a basic need, not just a want.
4. A girl sells handmade bracelets at a craft fair. She is acting as a ___?
A) consumer
B) producer
C) saver
D) buyer
She makes the bracelets herself and sells them to others, which is exactly the job of a producer. Producers create goods and offer them for sale.
Part B: Fill in the Blank
Write the correct answer on each line.
1. When you decide to buy a hat instead of gloves, the gloves are your opportunity cost.
Opportunity cost is the thing you give up when you pick something else. Choosing the hat means the gloves are what you missed out on.
2. A librarian who helps you find books is providing a service.
The librarian uses her knowledge and time to help you find what you need. Helpful work done for others is a service — the books themselves are the goods.
3. A new shirt hanging on a store rack is an example of a good.
A shirt is a real object you can touch, try on, and take home. Any physical item sold to shoppers is classified as a good.
4. Money that a person receives for doing a job is called income.
Income is the money earned from working. Paychecks, tips, and chores payments all count as income because they come from doing a job.
5. When fewer people want winter coats in summer, demand for coats drops.
Demand is how much people want to buy something. Since hardly anyone shops for coats in summer, demand for them naturally falls during the warm months.