Chapter 1 - The Scope and Method of Economics + appendix

Question 1

economics

Answer 1

The study of how individuals and societies choose to use the scarce resources that nature and previous generations have provided.

Question 2

opportunity cost

Answer 2

The best alternative that we forgo, or give up, when we make a choice or a decision.

Question 3

scarce

Answer 3

limited

Question 4

marginalism

Answer 4

The process of analyzing the additional or incremental costs or benefits arising from a choice or decision.

Question 5

efficient market

Answer 5

A market in which profit opportunities are eliminated almost instantaneously

Question 6

Industrial Revolution

Answer 6

The period in England during the late eighteenth and early nineteenth centuries in which new manufacturing technologies and improved transportation gave rise to the modern factory system and a massive movement of the population from the countryside to the cities.

Question 7

microeconomics

Answer 7

The branch of economics that examines the functioning of individual industries and the behavior of individual decision-making units—that is, firms and households.

Question 8

macroeconomics

Answer 8

The branch of economics that examines the economic behavior of aggregates—income, employment, output, and so on—on a national scale.

Question 9

positive economics

Answer 9

An approach to economics that seeks to understand behavior and the operation of systems without making judgments. It describes what exists and how it works.

Question 10

normative economics

Answer 10

An approach to economics that analyzes outcomes of economic behavior, valuates them as good or bad, and may prescribe courses of action. Also called policy economics.

Question 11

model

Answer 11

A formal statement of a theory, usually a mathematical statement of a presumed relationship between two or more variables.

Question 12

variable

Answer 12

A measure that can change from time to time or from observation to observation.

Question 13

Ockham’s razor

Answer 13

The principle that irrelevant detail should be cut away.

Question 14

ceteris paribus, or all else
equal

Answer 14

A device used to analyze the relationship between two variables while the values of other variables are held unchanged.

Question 15

post hoc, ergo propter
hoc

Answer 15

Literally, “after this (in time), therefore because of this.” A common error made in thinking about causation: If Event A happens before Event B, it is not necessarily true that A caused B.

Question 16

empirical economics

Answer 16

The collection and use of data to test economic theories.

Question 17

Economic Policy criteria

Answer 17

• Efficiency
• Equity
• Growth
• Stability

Question 18

efficiency

Answer 18

The condition in which the economy is producing what people want at the least possible cost.

Question 19

Equity

Answer 19

fairness

Question 20

economic growth

Answer 20

An increase in the total output of an economy. Growth occurs when a society acquires new resources or when it learns to produce more using existing resources.

Question 21

stability

Answer 21

A condition in which national output is growing steadily, with low inflation and full employment of resources.

Question 22

Why study economics?

Answer 22

(a) to learn a way of thinking
(b) to understand society
(c) to be an informed citizen

Question 23

economics is divided into __ branches that are __ and include multiple fields such as __

Answer 23

• Microeconomics
• Macroeconomics
  fields: economic history, international economics, and urban economics

Question 24

what kinds of questions does Economics attempt to answer?

Answer 24

• positive
• normative

Question 25

Cartesian coordinate system

Answer 25

A common method of graphing two variables makes use of two perpendicular lines against which the variables are plotted.

Question 26

graph

Answer 26

A two-dimensional representation of a set of numbers or data.

Question 27

negative relationship

Answer 27

A relationship between two variables, X and Y, in which a decrease in X is associated with an increase in Y and an increase in X is associated with a decrease in Y.

Question 28

Origin

Answer 28

On a Cartesian coordinate system, the point at which the horizontal and vertical axes intersect.

Question 29

Positive relationship

Answer 29

A relationship between two variables, X and Y, in which a decrease in X is associated with a decrease in Y, and an increase in X is associated with an increase in Y.

Question 30

Slope

Answer 30

A measurement that indicates whether the relationship between variables is positive or negative and how much of a response there is in Y (the variable on the vertical axis) when X (the variable on the horizontal axis) changes.

Y2-Y1/X2-X1

Question 31

time series graph

Answer 31

A graph illustrating how a variable changes over time.

Question 32

X-axis

Answer 32

On a Cartesian coordinate system, the horizontal line against which a variable is plotted.

Question 33

X-intercept

Answer 33

The point at which a graph intersects the X-axis.

Question 34

Y-axis

Answer 34

On a Cartesian coordinate system, the vertical line against which a variable is plotted.

Question 35

Y-intercept

Answer 35

The point at which a graph intersects the Y-axis.