Ch 1. Foundations

Question 1

Scarcity

Answer 1

resources are insufficient to satisfy unlimited human needs and wants

Question 2

Choice

Answer 2

choice must be made about what will be produces and what will be forgone

Question 3

Efficiency

Answer 3

Best possible use of scarce resources to avoid waste

Question 4

Allocative Efficiency

Answer 4

scarce resources are used to produce the goods and services that mostly satisfy society’s needs and wants

Question 5

Equity

Answer 5

Being fair or just

Question 6

Economic Well Being

Answer 6

levels of prosperity, economic satisfaction and standards of living among the members of a society

Question 7

Sustainability

Answer 7

Long-term maintenance of viability of any particular activity of policy

Question 8

Change

Answer 8

change between one situation and another situation that has been caused by a change in one or more variable

Question 9

Interdependence

Answer 9

economic decision-makers interact with and depend on each other

Question 10

Intervention

Answer 10

Refers to government intervention

Question 11

4 factors of production

Answer 11

Land - natural resources
Labour - effort from the people
Capital - manmade factor of production
Entrepreneurship - human skill to seek new oppourtunities

Question 12

Opportunity Cost

Answer 12

value of the next best alternative that must be sacrificed to obtain something else

Question 13

Free Good

Answer 13

good that is not scarce, and therefore has a zero opportunity cost

Question 14

3 Basic Questions

Answer 14

What/how much
How
For whom

Question 15

Resource Allocation

Answer 15

Assigning available resources or factors of production to specific uses chosen among many possible alternatives

Question 16

Free Market Economy

Answer 16

‘ideal type’ of economy based on the market approach to making economic decisions ; involve private sector ownership and decision-making and price rationing

Question 17

Planned Economy

Answer 17

all economic decision-making is carried out by government planning, rather than reliance on prices determined in markets

Question 18

Rationing

Answer 18

method used to apportion or divide something up between its interested users

Question 19

Production Possibilities Curve (or Frontier)

Answer 19

all combinations of the maximum amounts of 2 goods that can be produced by an economy, when there is full employment of resources and efficiency in production

Question 20

Economic Growth

Answer 20

increase in the quantity of output produced in an economy over a period of time

Question 21

Circular Flow of Income

Answer 21

In any given time period, the value of output produced in an economy is equal to the total income generated in producing that output, which is equal to the expenditures made to purchase that output

Question 22

Ceteris Paribus Assumption

Answer 22

All else remain equal

Question 23

Refutation

Answer 23

Contradict it

Question 24

Positive Economics

Answer 24

study of economics cased on the scientific method, used to arrive at knowledge about the economic world

Question 25

Normative Economics

Answer 25

Bases of judgements about what economic goals and economic policies ought to be