question
Scarcity
answer
society has limited resources and therefore cannot produce all the goods and services people wish to have
question
Economics
answer
the study of how society manages it scarce resources.
question
Microeconomics
answer
the study of decisions, because houses/firms make decisions on the allocation of resources.
question
Economy
answer
the wealth and resources of a region
question
#1 Tradeoffs
answer
to get something, you have to give something.
question
cost
answer
the value of what you give up
question
price
answer
the monetary value of a product
question
opportunity cost
answer
value of what's given up to obtain something.
question
rational people
answer
systematically and purposeful weigh the cost/benefit of decisions to achieve their objective, given the available resources.
question
marginal change
answer
next, additional, edge, small incremental adjustments to existing plan.
question
incentives
answer
something that induces people to act (prospect of reward or punishment)
question
market economy
answer
allocated resources through decentralized decisions by house/firms as they interact in markets.
question
property rights
answer
ability of individual to own and control scarce resources.
question
productivity
answer
amount of g/s produced by each unit of labor input
question
inflation
answer
increase in overall level of prices in economy
question
business cycle
answer
the irregular, largely unpredictable, fluctuations in economic activity - measured by production of g/s and unemployment rate.
question
efficieny
answer
society gets max benefits out of its scarce resources (enlarging econ pie)
question
equality
answer
benefits of scarce resources uniformly distributed among society (divide econ pie)
question
Invisible Hand
answer
self-regulating nature of the marketplace, uses price to influence economic activity.
question
market failure
answer
when a market, on its own, fails to produce an efficient allocation of resources.
question
externality
answer
type of market failure, impact of one persons action on well-being of bystander
question
market power
answer
type of market failure, when one economic actor has substantial influence on market price
question
voluntary trade
answer
both parties benefit
question
involuntary trade
answer
didn't have a choice, taxes
question
circular-flow diagram
answer
visual model of organization of economy, shows how money flows through markets among households and firms.
question
economic models
answer
simplified versions of reality used to analyze real-world economic situations
question
markets for goods/services
answer
households buyers, firms sellers
question
markets for factors of produciton
answer
firms buyers, household sellers
question
positive statement
answer
claims that attempt to describe world as it is, facts that are testable and either true or false
question
normative statements
answer
claims that attempt to prescribe how would should/ought to be.
question
Production Possibility Frontier
answer
graph, shows the possible combinations of outputs an economy can possibly produce given the available factors of production and available production technology.
question
Efficiency
answer
refers to how much a society can produce with its resources.
question
Equality
answer
refers to how evenly the benefits from using resources are distributed among members of society.
question
Steps Economists take when studying the Economy
answer
analyze data, collect data, devise theories.
question
Phenomenon of scarcity stems from the fact that
answer
resources are limited
question
Study of Microeconomics
answer
how individual household and firms make decisions
question
laws that enforce chemical hazard control are examples of government intervention that is intended to reduce
answer
externalities
question
You are considering staying in college another semester so that you can complete a major in finance. In deciding whether or not to stay you should
answer
compare the cost of staying one more semester to the benefits of staying one more semester
question
What do economists NOT generally regard as a legitimate reason for the government to intervene in a market?
answer
to protect an industry from foreign competition
question
another term for goods and services
answer
output
question
the basic principles of economics suggest that
answer
the government should become involved in markets when those markets fail to produce efficient or fair outcomes
question
Suppose that you have received $650 as a birthday gift. You can spend it today or you can put the money in a savings account for a year and earn 2 percent interest. The opportunity cost of spending the money today, in terms of what you could have in one year, is
answer
$663
question
Dale is a guitar teacher and Terrence is a tile layer. If Dale teaches Terrence's daughter to play the guitar in exchange for Terrence tiling Dale's kitchen floor, who is better off?
answer
both Dale and Terrence are made better off by trade.
question
Suppose the government taxes the wealthy at a higher rate than it taxes the poor and then develops programs to redistribute the tax revenue from the wealthy to the poor. This redistribution of wealth is more efficient or equal?
answer
is more equal but less efficient for society.
question
The "invisible hand" refers to
answer
how the decisions of household and firms lead to desirable market outcomes.
question
the adage, "There ain't no such thing as a free lunch," means
answer
people face tradeoffs
question
What observation was made by Adam Smith in his book The Wealth of Nations?
answer
Households and firms interacting in markets are guided by an "invisible hand" that leads them to desirable market outcomes.
question
Resources are scarce/plentiful for who?
answer
scarce for households and scarce for economies.
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
