lOMoAR cPSD| 61371432
WGU D089 Study Guide: Key Questions on Economic Principles
and concepts | Verified study complete Solutions | A+ Graded |
2026 Updates | 100% correct
Module 1 – The Economic Way of Thinking
1. What are the three fundamental questions every economy must answer? Give an example of a
“What” question.
a. What to produce
b. How to produce it
c. For whom to produce it
2. What do economists mean when they say that people “think at the margin”?
a. Making a decision based on the benefits
3. According to the 10 Principles of Economics, what determines a nation’s standard of living?
a. It is determined by the nation’s ability to produce goods and services
4. Using the 10 Principles of Economics, explain why trade is beneficial?
a. Exchanging abilities to supplement their own needs
5. How does printing money impact prices?
a. Printing too much causes prices to rise and that will cause inflation
6. What are the differences between the Traditional and the Market economy?
a. Tradition- makes decisions based on traditions, beliefs and customs; market
(decentralized)- makes decisions based on consumer demand
7. Identify two disadvantages of a Command economy?
a. Underground economies tend to develop as a response to difficult access to goods and
services
, lOMoAR cPSD| 61371432
b. People are discouraged from innovating and are required to follow orders
8. Explain one of the advantages of the Mixed economy?
a. Prices are set by supply and demand
9. How are macroeconomics and microeconomics different?
a. Macro- looks at the economy as a whole (inflation, government deficits, and growth);
micro- looks at individual agents within households or small businesses
10. Give an example of a normative statement.
a. “milk should be $6/gallon to give dairy farmers a higher living standard” (expresses value
about economic failures)
11. Identify the payment that goes to each of the four factors of production.
a. Natural resource, labor, capital, and entrepreneur; Rent, wages, interest and dividends,
and profit for entrepreneurship
12. What does the circular flow diagram depict?
a. Shows the flow of money and goods through economy
Module 2 – The Economic Problem
1. Why is the concept of scarcity so important in economics?
a. Creates limits that restrict the options available
2. What does an individual’s budget constraint identify?
a. Represents the combination of goods and services that a consumer can purchase given
current prices within his or her given income
3. Identify two ways in which the budget constraint and the PPF are similar and two ways in which
they are different.
a. Graph showing the possibility of attainable and not attainable with the budgets;
identifies all possible combos of two goods and services
4. Using the graph below, explain the trade-off associated with a movement from Point A to Point
B. – less air planes are being made, but more automobiles are being created
, lOMoAR cPSD| 61371432
5. Using the graph above, explain why there is no trade-off associated with the movement from
Point C to Point B. They are both attainable
6. Identify the points on the above graph that are efficient. Why are these efficient? A & B because
they are using the best out of the production that is possible.
7. What does the PPF look like when resources are homogeneous? Straight Line
8. How does an increase in labor productivity change the PPF? Will increase the amount of
resources that are being created
9. Define the term Opportunity Cost: the loss of potential gain from other alternatives when one
alternative is chosen
10. What causes increasing opportunity costs? All factors of production are at maximum output and
efficiency
11. Using the information below, what is the opportunity cost of a pound of beef when production is
increased from 100 lbs/month to 200 lbs/month? Losing 700 bushels of wheat a month
Beef (lbs/month) Wheat (bushels/month)
0 2,000
100 1,600
200 900
300 0
Module 3 – Supply, Demand and Elasticity
1. Explain the “Law of Demand” using a demand curve to illustrate the concept. The amount of a
good or service that consumers are willing and able to purchase at various prices during a
specified time period; higher prices lead to lower quantity demanded, vise versa.
2. Describe and illustrate a case where there is an increase in demand. Be sure to identify the
market being analyzed and the event leading to the increase in demand.
WGU D089 Study Guide: Key Questions on Economic Principles
and concepts | Verified study complete Solutions | A+ Graded |
2026 Updates | 100% correct
Module 1 – The Economic Way of Thinking
1. What are the three fundamental questions every economy must answer? Give an example of a
“What” question.
a. What to produce
b. How to produce it
c. For whom to produce it
2. What do economists mean when they say that people “think at the margin”?
a. Making a decision based on the benefits
3. According to the 10 Principles of Economics, what determines a nation’s standard of living?
a. It is determined by the nation’s ability to produce goods and services
4. Using the 10 Principles of Economics, explain why trade is beneficial?
a. Exchanging abilities to supplement their own needs
5. How does printing money impact prices?
a. Printing too much causes prices to rise and that will cause inflation
6. What are the differences between the Traditional and the Market economy?
a. Tradition- makes decisions based on traditions, beliefs and customs; market
(decentralized)- makes decisions based on consumer demand
7. Identify two disadvantages of a Command economy?
a. Underground economies tend to develop as a response to difficult access to goods and
services
, lOMoAR cPSD| 61371432
b. People are discouraged from innovating and are required to follow orders
8. Explain one of the advantages of the Mixed economy?
a. Prices are set by supply and demand
9. How are macroeconomics and microeconomics different?
a. Macro- looks at the economy as a whole (inflation, government deficits, and growth);
micro- looks at individual agents within households or small businesses
10. Give an example of a normative statement.
a. “milk should be $6/gallon to give dairy farmers a higher living standard” (expresses value
about economic failures)
11. Identify the payment that goes to each of the four factors of production.
a. Natural resource, labor, capital, and entrepreneur; Rent, wages, interest and dividends,
and profit for entrepreneurship
12. What does the circular flow diagram depict?
a. Shows the flow of money and goods through economy
Module 2 – The Economic Problem
1. Why is the concept of scarcity so important in economics?
a. Creates limits that restrict the options available
2. What does an individual’s budget constraint identify?
a. Represents the combination of goods and services that a consumer can purchase given
current prices within his or her given income
3. Identify two ways in which the budget constraint and the PPF are similar and two ways in which
they are different.
a. Graph showing the possibility of attainable and not attainable with the budgets;
identifies all possible combos of two goods and services
4. Using the graph below, explain the trade-off associated with a movement from Point A to Point
B. – less air planes are being made, but more automobiles are being created
, lOMoAR cPSD| 61371432
5. Using the graph above, explain why there is no trade-off associated with the movement from
Point C to Point B. They are both attainable
6. Identify the points on the above graph that are efficient. Why are these efficient? A & B because
they are using the best out of the production that is possible.
7. What does the PPF look like when resources are homogeneous? Straight Line
8. How does an increase in labor productivity change the PPF? Will increase the amount of
resources that are being created
9. Define the term Opportunity Cost: the loss of potential gain from other alternatives when one
alternative is chosen
10. What causes increasing opportunity costs? All factors of production are at maximum output and
efficiency
11. Using the information below, what is the opportunity cost of a pound of beef when production is
increased from 100 lbs/month to 200 lbs/month? Losing 700 bushels of wheat a month
Beef (lbs/month) Wheat (bushels/month)
0 2,000
100 1,600
200 900
300 0
Module 3 – Supply, Demand and Elasticity
1. Explain the “Law of Demand” using a demand curve to illustrate the concept. The amount of a
good or service that consumers are willing and able to purchase at various prices during a
specified time period; higher prices lead to lower quantity demanded, vise versa.
2. Describe and illustrate a case where there is an increase in demand. Be sure to identify the
market being analyzed and the event leading to the increase in demand.
