Exam 1 Terms

Question 1

(Marginal) Willingness to pay

Answer 1

the maximum price at or below which a consumer will definitely buy one unit of a product.

Question 2

(Marginal) Cost

Answer 2

the cost added by producing one additional unit of a products or service.

Question 3

Price

Answer 3

the quantity of. money for which one may buy or sell a commodity.

Question 4

Quantity Demanded

Answer 4

the aggregate value of the goods or services demanded by consumers in a stated period of time. (depends on the price of goods or serviced in the market.)

Question 5

Demand

Answer 5

a consumer’s desire to purchase goods and services and willingness to pay a price for a specific good or service.

Question 6

Quantity Supplied

Answer 6

the amount of goods or services that suppliers will produce and sell at a given market price.

Question 7

Competitive Equilibrium

Answer 7

a condition in which profit-maximizing producers and utility-maximizing consumers in competitive markets with freely determined prices arrive at an equilibrium price.

Question 8

Price Control

Answer 8

government-mandated legal minimum or maximum prices set for specified goods.

Question 9

Price Ceiling

Answer 9

keeps a price from rising above certain level (the ceiling), while a price floor keeps a price from falling below a certain level (the floor).

Question 10

Price Floor

Answer 10

the lowest legal price that can be paid in a market for goods and services, labor, or financial capital.

Question 11

Excess Demand (Shortage)

Answer 11

a situation in which the demand for a product or service exceeds its supply in a market.

Question 12

Excess Supply (Surplus)

Answer 12

a situation in which the quantity of a good or service supplied is more than the quantity demanded, and the price is above the equilibrium level determined bu supply and demand.

Question 13

Revenue

Answer 13

the income that a firm receives from the sale of a good or service to its customers.

Question 14

Profit

Answer 14

the difference between the revenue received from the sale of an output and the costs of all inputs used, as well as any opportunity costs.

Question 15

Marginal Analysis and Maximizing Profit

Answer 15

an examination of the additional benefits of an activity compared to the additional costs incurred by that same activity. used as a decision-making tool to help them maximize their potential profits.

Question 16

Law of Demand

Answer 16

on of the most fundamental concepts in economics. states that quantity purchased varied inversely with price. (the higher the price, the lower the quantity demanded)

Question 17

Supply

Answer 17

the total amount of a specific good or service that is available to consumers. can relate to the amount available at a specific price or the amount available across a range of prices if displayed on a graph.

Question 18

Law of Supply

Answer 18

states that other factors remaining constant, price and quantity supplied of a good are directly related to each other. (when the price of a good rises, the supplier increases the supply in order to earn a profit because of higher prices)

Question 19

Scarcity

Answer 19

the gap between limited- that is, scarce- resources and theoretically limitless wants. (requires people to make decisions about how to allocate resources efficiently, in order to satisfy basic needs and as many additional wants as possible)

Question 20

Opportunity Cost

Answer 20

represent the potential benefits an individual, investor, or business misses out on when choosing one alternative over another.

Question 21

Law of Diminishing Returns

Answer 21

states that if one input in the production of a commodity is increased while all other inputs are help fixed, a point will eventually be reached at which additions of the input yeild.

Question 22

Budget Constraint

Answer 22

the boundary the opportunity set– all possible combinations of consumption that someone can afford given the prices of goods and the individual’s income. (measures the cost in terms of what must be given up in exchange)

Question 23

Utility

Answer 23

the total satisfaction received from consuming a goods or service. (the economic utility of a good or service important to understand, because it directly influences the demand, and therefore price, of that good or service)

Question 24

Marginal Utility

Answer 24

the additional satisfaction or benefit (utility) that a consumer derives from buying an additional unit of a commodity or service.

Question 25

Law of Diminishing Marginal Utility

Answer 25

states that all else equal consumption increases the marginal utility derived from each additional unit declines. (derived as the change in utility as an additional unit is consumed)

Question 26

Production Possibility Frontier (PPF)

Answer 26

a curve that illustrates the variations in the amounts in amount that can be produced of two products if both depend upon the same finite resource for their manufacture.

Question 27

Economics

Answer 27

the social science that studies how people interact with value; in particular the production, distribution, and consumption of goods and services. (focuses om the behavior and interactions of economic agents and how economies work)

Question 28

Microeconomics

Answer 28

the study of decision made by people and businesses regarding the allocation of resources, and prices at which they trade goods and services.

Question 29

Macroeconomics

Answer 29

a branch of economics that deals with how an economy functions on a large scale.

Question 30

Social Science

Answer 30

studies how people interact with value.

Question 31

Constraints

Answer 31

involves external economic factors that affect a company and usually outside of its control.

Question 32

Objectives

Answer 32

that targets that are set by individuals/firms/governments to achieve.

Question 33

Informations

Answer 33

a branch of microeconomic theory that studies how informations and information systems affect an economy and economic decisions. (has special characteristics:it is easy to create but hard to trust/ easy to spread but hard to control)

Question 34

Rationality

Answer 34

when you make a choice, you will choose the thing you like best… use it to mean sensible, or reasonable. (as long as you are doing what you want given your situation, you’re acting rationally)

Question 35

Interaction

Answer 35

conducted between economic agents– individuals and collectives, through exchange of natural or artificial entities– goods, services, and money, in a myriad of combinations.

Question 36

Model

Answer 36

a theoretical construct representing economic processes by a set of a variables and a set of logical and/or quantitative relationships between them. (a simplified, often mathematical, framework designed to illustrate complex processes.

Question 37

Theory

Answer 37

try to explain economic phenomena, to interpret why and how the economy behaves and what is the best solution- how to influence ors love these economic phenomena.

Question 38

Empirical

Answer 38

publishes high quality using econometric or statistical methods to fill the gaps between economic theory and observed data. (emphasizes the replicability of empirical results.

Question 39

Positive

Answer 39

objective and fact-based where the statements are precise, descriptive and clearly measurable.

Question 40

Normative

Answer 40

focuses on the value of economic fairness, or what the company “should be” or “ought to be.” (based on value judgments)