Economic Decisions

Question 1

Economics

Answer 1

is the discipline that studies how efficient decisions are made

Question 2

Efficient decisions

Answer 2

involve choosing the most valuable alternative.

Question 3

theory of revealed preference.

Answer 3

……

Question 4

Characteristic of Value

Answer 4

• Value depends on the situation.
• Value is different for different people.
• Subsequent units of the same good have less value

Question 5

optimal arrangement principle

Answer 5

The idea that we first choose the best, then the second best, and so on,

Question 6

value of something to an individual

Answer 6

the most that individual is willing to sacrifice to obtain that something

Question 7

cost

Answer 7

the value of the best alternative which is sacrificed when a decision is made

Question 8

no free lunch principle

Answer 8

any decision has at least two alternatives, choosing an alternative means that one must sacrifice at least one other alternative.

Question 9

Macroeconomics

Answer 9

study of entire economies, using concepts like total output, the unemployment rate, the national debt, total investment

Question 10

scarcity

Answer 10

We have many more wants than our resources can satisfy

Question 11

Marginal Value

Answer 11

the value of the individual units of that something

Question 12

marginal analysis

Answer 12

We consume each unit for which the marginal value is at least as great as marginal cost

Question 13

Law of Diminishing Returns

Answer 13

As we add workers to a production facility, eventually they become less productive because there’s no way for everyone to take part in the production process

Question 14

Demand

when does it change/how?

Answer 14

the relationship between the possible prices of something and the quantities people are willing to buy, all things being equal.
The demand curve is the same as the marginal value curve.

goes up… to right

Question 15

supply

Answer 15

the relationship between the possible prices of something and the quantities that people or firms are willing and able to sell, other things equal.

Question 16

Social Gain

Answer 16

= Total Value - Total Cost

Question 17

Consumer’s Gain

Answer 17

= Total Value - Total Amount Paid

Question 18

Producer’s Gain

Answer 18

= Total Amount Paid - Total Cost

Question 19

the economic problem

Answer 19

allocating scarce resources to their best uses.

Question 20

Changes in supply

Answer 20

shifts in the supply curve. That is, producers wish to produce more or less, even if the price does not change. They are caused by changes in the producer’s costs.

Question 21

Changes in demand

Answer 21

shifts in the demand curve. That is, consumers wish to buy more or less, even if the price does not change. They are caused by changes in things that influence the consumer’s willingness to purchase the product which have nothing to do the product price