Chapter 1&2

Question 1

consumer goods

Answer 1

produced for present consumption

examples: food, entertainment, clothing

Question 2

capital good

Answer 2

help produce other valued goods and services in the future

examples: roads, factories, trucks, and computers

Question 3

investment

Answer 3

process of using resources to create or buy new capital

Question 4

short run

Answer 4

period in which we make decisions that reflect our immediate short term wants, needs, or limitations.
-consumers can partially adjust their behavior

Question 5

long run

Answer 5

period in which we make decisions that reflect our new, wants, and limitations over a long time
-consumer have to fully adjust to market conditions

Question 6

competitive advantage

Answer 6

ability of an individual to do a particular economic activity (making a specific product) more efficiently than another activity

Question 7

absolute advantage

Answer 7

the ability of one producer to Make more than another producer with the same quantity of resources

Question 8

specialization

Answer 8

limiting of one’s work to a particular area

-enables workers to enjoy gains from trade

Question 9

law of increasing opportunity cost

Answer 9

opportunity cost or producing a good rises as society produces more of it

Question 10

production possibilities frontier (PPF)

Answer 10

model that illustrates the combinations of outputs that a society can produce if all of its resources are being used efficiently

-outcome is considered efficient when resources are fully utilized and potential output is maximized

Question 11

endogenous factors

Answer 11

the variables that can be controlled for in a model

-know about and can control

Question 12

exogenous factors

Answer 12

factors beyond our control- outside the model

Question 13

ceteris paribus

Answer 13

means “other things being equal” or “all else equals” and is used to build economic models
- allows economists to examine a change in one variable while holding everything else constant

Question 14

positive statement

Answer 14

can be tested and validated; it describes “what is”

Question 15

normative statement

Answer 15

an opinion that cannot be tested or validated; describes “what ought to be”

Question 16

trade

Answer 16

voluntary exchange of goods and services between two or more parties

Question 17

comparative advantage

Answer 17

refers to the situation where am individual, business, or country can produce at a lower opportunity cost than a competitor can

Question 18

double coincidence of wants

Answer 18

occur when each party in an exchange transaction has what the other party desires

Question 19

markets

Answer 19

bring buyers and sellers together to exchange goods and services

Question 20

barter

Answer 20

involves involuntary trading a good they already have or providing a service in exchange for something they want

Question 21

circular flow

Answer 21

shows how resources and final goods and services flow through the economy

Question 22

marginal thinking

Answer 22

requires decision makers to evaluate whether the benefit of one more unit of something is greater than its cost

Question 23

opportunity cost

Answer 23

highest-valued alternative that must be sacrificed to get something else

Question 24

incentives

Answer 24

factors that motivate a person to act or exert effort

Question 25

microeconomics

Answer 25

the study of the individuation units that make up the economy

Question 26

macroeconomics

Answer 26

the Study of the overall aspects and workings of an economy

Question 27

scarcity

Answer 27

refers to the limited nature of society’s resources, given society’s unlimited wants and needs

Question 28

economics

Answer 28

the study of how am individual and societies allocate their limited resources to satisfy their unlimited wants

Question 29

variable

Answer 29

a quantity that can take on more than one value

Question 30

scatterplot

Answer 30

a graph that allows individual (x,y) points

Question 31

positive correlation

Answer 31

occurs when two variables move in the same direction

Question 32

negative correlation

Answer 32

occurs when two variables move in opposite directions

Question 33

slope

Answer 33

refers to the change in the ride along the y axis (vertical) divided by the change in the run along the x axis (horizontal)

Question 34

causality

Answer 34

occurs when one variable influences another

Question 35

reverse causation

Answer 35

occurs when causation is incorrectly assigned amount associates events

Question 36

Variable

Answer 36

quantity that can take on more than one value

Question 37

Single Variable Graphs

Answer 37

Bar Graph, Pie Chart, and Time-Series Graph

Question 38

Scatterplot

Answer 38

graph that shows individual (x, y) points

Question 39

Positive correlation

Answer 39

two variables move in the same direction

Question 40

negative correlation

Answer 40

two variables move in opposite directions

Question 41

slope

Answer 41

rise along y axis (vertical) divided by run along x six (horizontal)
-positive, negative, zero slope

Question 42

causality

Answer 42

occurs when one variable influences another

Question 43

reverse causality

Answer 43

causation is incorrectly assigned amount associated events