Chapter 2- Scarcity

Question 1

Budget constraints

Answer 1

All possible consumption combinations of goods that someone can afford given the prices of goods, when income is spent.

Question 2

Comparative advantage

Answer 2

When a country can product a good at a lot cost in terms of other goods, or when a Courtney has a power opportunity cost of production.

Question 3

Invisible hand

Answer 3

The idea that self interested behaviour by individuals can lead to positive social outcomes

Question 4

Law of diminishing marginal utility

Answer 4

As we consume more of a good or service, the utility we get from additional units of the good or service tends to become smaller than what we receive from earlier units

Question 5

Law of diminishing returns

Answer 5

As additional increments of resources are added to producing a good or service. The marginal benefit from those additional increments will decline

Question 6

Marginal analysis

Answer 6

Examination of decisions on the margin, meaning a little less from ten status quo

Question 7

Normative statement

Answer 7

Statement which describes how the world should be

Question 8

Opportunity set

Answer 8

All possible combination of consumption that someone can afford given the prices of goods and the individual income

Question 9

PPF

Answer 9

Production possibilities frontier. A diagram that shows the productivity combination of two products that an economy can produce given the resources it has available

Question 10

What is the difference between demand and quantity demanded

Answer 10

Demand refers to the entire schedule of quantity and prices

Quantity demanded refers to the demand at a particular price

Question 11

Demand shifters to the right

Answer 11

Taste in greater popularity 
Populate likely to buy rises 
Price of substitutes rises 
Price of complements falls 
Future expectations encourage buying

Question 12

Demand shifters to left

Answer 12

Taste in popularity lessens 
Population likely to buy drops 
Income drops (for a normal good)
Price of substitute falls 
Price of complements rises 
Future expectations discourage buying

Question 13

Shifts supply curve to the right

Answer 13

Favourable natural conditions for production
A fall in input price
Improved technology
Lower product taxes or less costly regulations

Question 14

Supply shifters to the left

Answer 14

Poor natural conditions for production
A rise in input price
A decline in technology
Higher product tax, more costly regulations

Question 15

Modelling changes In Equilibrium

Answer 15

1. Draw initial equilibrium
2. Decide if change shifted supply or demand
3. Determine diction of shift
4. Identify new equilibrium

Question 16

Allocative efficiency

Answer 16

When the mix of goods being produced represents the mix that society most desires