Economics Unit 1

Question 1

microeconomics

Answer 1

focuses on individual decision-making units and how they interact

Question 2

macroeconomics

Answer 2

explores the economy as a whole

Question 3

scarcity

Answer 3

the fixed amount of goods or services available

Question 4

mixed economy

Answer 4

an economy which practiced characteristics of both command and market economies; supply and demand largely influence the economy, but there is government intervention to meet certain economic goals

Question 5

opportunity cost

Answer 5

the cost of choosing; what you give up by choosing one option

Question 6

endowment

Answer 6

natural and human resources from which all goods and services must be produced
-finite, but not fixed

Question 7

traditional economy

Answer 7

an economic system in which traditions, customs, and beliefs help shape the goods and services the economy produces, as well as the rule and manner of their distribution also referred to as a subsistence economy, a traditional economy is defined by bartering and trading

Question 8

command economy

Answer 8

an economic system in which the means of production are publicly owned and economic activity is directed by a central government or portion of the government

Question 9

market economy

Answer 9

an economic system in which the forces of supply and demand determine what goods and services are produced

Question 10

goods

Answer 10

objects that can fulfill human wants/needs, provide utility

Question 11

services

Answer 11

economic activity that is intangible; provides utility, but cannot be stored

Question 12

profit motive

Answer 12

the tendency of people to engage in activities that will lead to monetary gain

Question 13

consumer sovereignty

Answer 13

the economic power of the individual in a free market

Question 14

government regulation

Answer 14

requirements the government places on private firms and individuals to achieve the government’s goals

Question 15

marginal utility

Answer 15

additional increment of utility associated with consuming one more unit of a good or service

Question 16

margin

Answer 16

in a succession of units, the specific unit you are focusing on

Question 17

total utility

Answer 17

the total satisfaction derived from consuming a specific quantity of a good or service; the total of marginal utilities for all individual units consumed

Question 18

satiate

Answer 18

satisfy

Question 19

initial decision

Answer 19

over-simplified decision-making process based on utility

Question 20

bliss point

Answer 20

maximization of utility

Question 21

marginal analysis

Answer 21

evaluating the impact of one additional unit

Question 22

util

Answer 22

a measure of utility

Question 23

diminishing marginal productivity

Answer 23

initially, one input increases the initial successive units of input toward the output, but eventually this will add to less output

Question 24

balancing at the margin

Answer 24

maximizing utility in light of scarcity

Question 25

discounting the future

Answer 25

utility diminishes the further in the future that utility is realized

Question 26

oligopoly

Answer 26

a market characterized by a small number of firms who realize they are interdependent in their pricing and output policies

Question 27

monopoly

Answer 27

power of being the only seller

Question 28

monopsony

Answer 28

power of being the only buyer; not a price taker

Question 29

risk

Answer 29

anything that affects the outcome of your choices that can associated with a probability

Question 30

risk perception

Answer 30

how our experiences (socialization, advertising, etc.) impact how we value risk

Question 31

specialization

Answer 31

individuals dividing up labor within/across trades

Question 32

division of labor

Answer 32

increases productivity as individuals are better able to become more dexterous when they focus on one task

Question 33

absolute advantage

Answer 33

what an individual/nation is absolutely better at

Question 34

comparative advantage

Answer 34

the ability to produce a good at a lower opportunity cost that the person or country one trades with

Question 35

unjust outcomes

Answer 35

unfair outcomes due to inequality of the implementation of rules

Question 36

assumptions

Answer 36

an abstraction that simplifies a scenario

Question 37

strong assumptions

Answer 37

unrealistic assumptions (weak assumptions are more realistic); to relax assumptions we go from strong to weak assumptions