Chapter 1-5

Question 1

What is economics?

Answer 1

the study of how humans make decisions in the face of scarcity

Question 2

What is scarcity?

Answer 2

The human want for goods and services exceeds what’s available

Question 3

What are Command Economies?

Answer 3

a single entity decides how labor and resources are distributed.

Question 4

What is Microeconomics?

Answer 4

The study of decisions made by households and firms

Question 5

What is Macroeconomics?

Answer 5

The study of the economy as a whole.

Question 6

What is the Budget Constraint Model?

Answer 6

A model illustrating the range of choices you can make between two goods within a particular budget.

Question 7

What is the Production Possibilities Frontier?

Answer 7

a model showing the tradeoff between two goods a society can specialize in

Question 8

What is the Law of Diminishing Return?

Answer 8

As additional resources are devoted to producing a good or service, the marginal benefit from that increment is declining

Question 9

What is Productive Efficiency?

Answer 9

it is impossible to produce more of one good without decreasing the output of another good.

Question 10

What is Allocative Efficiency?

Answer 10

the bundle of goods that maximizes society’s desires.

Question 11

What are Sunk Costs?

Answer 11

Costs that are made in the past and cannot be recovered

Question 12

What are Positive Statements?

Answer 12

facts or things that can be proven to be facts

Question 13

What are Normative Statements?

Answer 13

A statement that describes how the world “should be”

Question 14

What is a Demand Schedule?

Answer 14

a table that shows the quantity demanded at each price.

Question 15

What is a Demand Curve?

Answer 15

a graph that shows the quantity demanded at each price

Question 16

What is the Law of Demand?

Answer 16

As price increases quantity demanded decreases.

Question 17

What is the Law of Supply?

Answer 17

as price increases, quantity supplied increases

Question 18

What are the factors that shift the demand curve?

Answer 18

Change in preferences
Change in the composition of the population
Changes in price
Change in income

Question 19

What are normal goods?

Answer 19

a good that you buy more of as your income increases

Question 20

What are inferior goods?

Answer 20

A good that you buy less of as your income increases

Question 21

What is a substitute?

Answer 21

A good that can replace another (e.g. Coke and Pepsi, name brand vs generic brand)

Question 22

What are compliments?

Answer 22

goods that are often used together so that consumption of goods tends to enhance consumption of the other. (e.g. hot dogs and hot dog buns)

Question 23

What are the factors that shift supply?

Answer 23

Natural Conditions
Change in Input Prices
Technology

Question 24

What is a Price Ceiling?

Answer 24

a legal maximum price

Question 25

What is a Price Floor?

Answer 25

a legal minimum price

Question 26

What are the factors that shift the labor demand?

Answer 26

Demand for Output
Education and Training
Technology
Number of Companies
Government Regulation
Price and Availability of Other Inputs

Question 27

What are the factors that shift the supply of labor?

Answer 27

Number of Workers
Required Education
Government Policies

Question 28

What is a Minimum Wage?

Answer 28

The price floor of the labor market

Question 29

What does it mean if demand or supply is inelastic?

Answer 29

when the price goes up or down, consumers’ buying habits stay about the same.

Question 30

What does it mean if demand or supply is elastic?

Answer 30

as price went up or down, customers buying habits changed dramtically