Economics: Supply & Demand — Answer Key
Part A: Fill in the Blank
Write the missing word or number on each line.
1. Money collected by the government from citizens and businesses is called taxes.
Taxes are payments citizens and businesses make to the government, which uses that money to fund public services like schools, roads, and emergency responders.
2. Roads, parks, and public schools are examples of government services.
The government provides services like roads, parks, and schools because these benefit everyone in a community and would be difficult for individual people or businesses to build on their own.
3. A tax added to the price of an item you buy at a store is called a sales tax.
Sales tax is a percentage added at the register when you purchase something, which is why the total you pay is often a little more than the price shown on the tag.
4. Police officers, firefighters, and librarians are paid with tax money.
Public workers like police officers, firefighters, and librarians are paid with tax dollars because they serve the entire community rather than working for a private company.
5. When prices of many goods rise over time, this general increase is called inflation.
Inflation is a broad rise in prices across the economy, meaning the same dollar buys fewer goods over time -- for example, a candy bar that cost 50 cents years ago might cost a dollar today.
6. A person who uses their own money to buy part of a business hopes to earn a profit.
Profit is the money left over after all costs are paid. Investors put money into a business hoping it will earn more than they spent, giving them a profit in return.
7. The government creates laws and regulations to keep markets fair for everyone.
Regulations are official rules the government sets to prevent unfair business practices, protect consumers from unsafe products, and keep competition healthy in the marketplace.
8. Public goods like streetlights are available to everyone and no one can be excluded.
Public goods like streetlights benefit everyone equally because no one can be blocked from using them, which is why the government pays for them with tax money rather than charging each person.
9. When inflation happens, each dollar buys less than it did before.
During inflation, prices go up while the dollar stays the same size, so each dollar stretches less far and you need more money to buy the same items you bought before.
Part B: Matching
Match each item on the left to the correct answer on the right.
1. Match each item to its correct answer.
Sales tax
→ added to the price of purchases
prices rise over time
Income tax
→ paid on money you earn
added to the price of purchases
Public school
→ free education funded by taxes
paid on money you earn
Inflation
→ prices rise over time
free education funded by taxes
Correct matches: Sales tax → added to the price of purchases; Income tax → paid on money you earn; Public school → free education funded by taxes; Inflation → prices rise over time.