Ch 1

Question 1

Economics

Answer 1

Social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity

Question 2

Economic Perspective

Answer 2

“economic way of thinking” Has scarcity and closely interrelated features

Question 3

Opportunity Cost

Answer 3

To obtain more of one thing, society forgoes the opportunity of getting the next best thing

Question 4

Utility

Answer 4

The pleasure, happiness, or satisfaction obtained from consuming a good or service

Question 5

Marginal Analysis

Answer 5

Comparisons of marginal benefits and marginal costs

Question 6

Scientific Method

Answer 6

1) Observing real-world behavior and outcomes
2) Based on those observations, formulating a possible explanation of cause and effect (hypothesis)
3) Testing this explanation by comparing the outcomes of specific events to the outcome predicted by the hypothesis
4) Accepting, rejecting and modifying the hypothesis, based on these comparisons,
5) Continuing to test the hypothesis against the facts. If favorable results accumulate, the hypothesis evolves into a theory

Question 7

Economic Principle

Answer 7

A statement about economic behavior or the economy that enables prediction of the probable effects of certain actions

Question 8

Other-Things-Equal Assumption

Answer 8

Certeris Paribus - The assumption that factors other than those being considered do not change

Question 9

Microeconomics

Answer 9

The part of economics concerned with decision making by individuals customers, workers, households, and business firms.

Question 10

Macroeconomics

Answer 10

examines either the economy as a whole or its basic subdivisions or aggregates, such as the government, household, or business sectors.

Question 11

Aggregate

Answer 11

A collection of specific economic units treated as if they were one unit

Question 12

Positive Economics

Answer 12

focuses on facts and cause-and-effect relationships. It includes description, theory development, and theory testing. Avoids value judgments.

Question 13

Normative Economics

Question 14

Economizing Problem

Answer 14

the need to make choices because economic wants exceed economic means

Question 15

Budget Line

Answer 15

A schedule or curve that shows the various combinations of two products a consumer can purchase with a specific money income

Question 16

Economic Resources

Answer 16

all natural, human, and manufactured rescources that go into the production of goods and services.

Question 17

Land

Answer 17

Included all natural resources used in the production porcess. Forests, minerals, oil deposits, water resources, wind power, sunlight, and arable land.

Question 18

Labor

Answer 18

The physical actions and mental activites that people contribute to the production of goods and services

Question 19

Capital (or Capital Goods)

Answer 19

includes all manufactured aids used in producing consumer goods and services.

Includes all factory, storate, transportation, and distribution facilities

Question 20

Investment

Answer 20

Spending that pays for the production and accumulation of capital goods

Question 21

Entrepreneurial Ability

Answer 21

The entrepreneur takes the iniative in combining the resources of land, labor, and capital to produce a good or service.

Question 22

Factors of Production

Answer 22

Land, labor, capital, and entrepreneural ability. AKA. Inputs

Question 23

Consumer Good

Answer 23

Products that satisfy our wants directly

Question 24

Capital Goods

Answer 24

Products that satisfy our wants indirectly by making possible more effcient production of consumer goods

Question 25

Production Possibilities Curve

Answer 25

Displays the different combinations of goods and services that society can produce in a fully employed economy, assuming a fixed availability of supplies of resources and fixed technology

Question 26

Law of Increasing Opportunity Costs

Answer 26

As the production of a particular good increases, the opportunity cost of producing an additional unit rises

Question 27

Economic Growth

Answer 27

A larger total output