Ch 1 - Limits, Alternatives, and Choices

Question 1

economics

Answer 1

The study of how people, institutions, and society make economic choices under conditions of scarcity

Question 2

economic perspective

Answer 2

making rational decisions by comparing the marginal benefits and marginal costs of their actions

Question 3

opportunity cost

Answer 3

The value of the good, service, or time forgone to obtain something else

Question 4

utility

Answer 4

The satisfaction obtained from consuming a good or service

Question 5

marginal analysis

Answer 5

The comparison of marginal (“extra” or “additional”) benefits and marginal costs, usually for decision making

Question 6

scientific method

Answer 6

The systematic pursuit of knowledge by observing facts and formulating and testing hypotheses to obtain theories, principles, and laws

Question 7

principles

Answer 7

Statements about economic behavior that enable prediction of the probable effects of certain actions

Question 8

other-things-equal assumption (AKA Ceteris paribus)

Answer 8

The assumption that factors other than those being considered do not change.

Question 9

microeconomics

Answer 9

The part of economics concerned with individual decision-making units, such as a consumer, a worker,or a business firm

Question 10

macroeconomics

Answer 10

The part of economics concerned with the economy as a whole or major components of the economy

Question 11

aggregate

Answer 11

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

Question 12

economic problem

Answer 12

The need for individuals and society to make choices b/c wants exceed means

Question 13

budget line

Answer 13

A line that shows various combinations of 2 products a consumer can purchase with a specific money income, given the product’s prices

Question 14

constant opportunity cost

Answer 14

An opportunity cost that remains the same as consumers shift purchases from one product to another along a straight-line budget line

Question 15

economic resources

Answer 15

The land, labor, capital, and entrepreneurial ability used in production of goods and services

Question 16

land

Answer 16

Natural resources (“gifts of nature”) used to produce goods and services

Question 17

labor

Answer 17

The physical and mental talents and efforts of people used to produce goods and services

Question 18

capital

Answer 18

Human-made resources (buildings, machinery, and equipment) used to produce goods and services

Question 19

investment

Answer 19

The purchase of capital resources

Question 20

entrepreneurial ability

Answer 20

The human talent that combines the other resources to produce a product, make strategic decisions, and bear risks

Question 21

factors of production

Answer 21

Economic resources: land, labor,capital, and entrepreneurial ability

Question 22

consumer goods

Answer 22

Products and services that directly satisfy consumer wants

Question 23

capital goods

Answer 23

Items that are used to produce other goods and therefore do not directly satisfy consumer wants

Question 24

production possibilities curve

Answer 24

A curve showing the different combinations of goods and services that can be produced in a fully employed economy, assuming the available supplies of resources and technology are fixed

Question 25

law of increasing opportunity costs

Answer 25

The principle that as the production of a good increases, the opportunity cost per additional unit rises

Question 26

economic growth

Answer 26

An outward shift of the production possibilities curve that results from an increase in resource supplies or quality or an improvement in technology