Exam #1 Vocab

Question 1

capital

Answer 1

Final goods used in the production of other goods. Ex: exquipment, structures, etc.

Question 2

capital-intensive

Answer 2

Production processes that use a high ratio of capital to labor inputs.

Question 3

ceteris paribus

Answer 3

The assumption of nothing else changing.

Question 4

comparative advantage

Answer 4

The ability of a country to produce a specific good at a lower opportunity cost than its trading partners.

Question 5

complementary goods

Answer 5

Goods frequently consumed in combination; when the price of x rises, the demand for good y falls, ceteris paribus.

Question 6

demand

Answer 6

The ability and willingness to buy specific quantities of a good at alternate prices in a given time period, ceteris paribus.

Question 7

demand curve

Answer 7

A curve describing the quantities of a good a consumer is willing and able to buy at alternative prices in a given time period, ceteris paribus.

Question 8

demand schedule

Answer 8

A table showing the quantities of a good a consumer is willing and able to buy at alternative prices in a given time period, ceteris paribus.

Question 9

economic growth

Answer 9

An increase in output (read GDP); an expansion of production possibilities.

Question 10

economics

Answer 10

The study of how best to allocate scarce resources among competing uses.

Question 11

efficiency

Answer 11

Maximum output of a good from the resources used in production.

Question 12

entrepreneurship

Answer 12

The assembling of resources to produce new or improved products and technologies.

Question 13

equilibrium price

Answer 13

The price at which the quantity of a good demanded in a given time period equals the quantity supplied.

Question 14

exports

Answer 14

Goods and services sold to foreign buyers.

Question 15

externalities

Answer 15

Costs (or benefits) of a market activity borne by a third party.

Question 16

factor market

Answer 16

Any place where factors of production (ex: land, labor, capital) are bought and sold.

Question 17

factors of production

Answer 17

Resource inputs used to produce goods and services, such as land, labor, capital, and entrepreneurship.

Question 18

government failure

Answer 18

Government intervention that fails to improve economic outcomes.

Question 19

gross domestic product (GDP)

Answer 19

The total market value of all final goods and services produced within a nation’s borders in a given time period.

Question 20

human capital

Answer 20

The knowledge and skills possessed by the workforce.

Question 21

imports

Answer 21

Goods and services purchased from foreign sources.

Question 22

income quintile

Answer 22

One-fifth of the population, rank-ordered by income (ex: top fifth).

Question 23

income transfers

Answer 23

Payments to individuals for which no current goods or services are exchanged, ex: Social Security, welfare, unemployment benefits.

Question 24

investment

Answer 24

Expenditures on (production of) new plant, equipment, and structures (capital) in a given time period, plus changes in business inventories.

Question 25

laissez faire

Answer 25

The doctrine of “leave it alone”, of nonintervention by government in the market mechanism.

Question 26

law of demand

Answer 26

The quantity of a good demanded in a given time period increases as its price falls, ceteris paribus.

Question 27

law of supply

Answer 27

The quantity of a good supplied in a given time period increases as its price increases, ceteris paribus.

Question 28

macroeconomics

Answer 28

The study of aggregate economic behavior, of the economy as a whole.

Question 29

market demand

Answer 29

The total quantities of a good or service people are willing and able to buy at altenative prices in a given time period; the sum of individual demands.

Question 30

market failure

Answer 30

An imperfection in the market mechanism that prevents optimal outcomes.

Question 31

market mechanism

Answer 31

The use of market prices and sales to signal desired outputs (0r resource allocations).

Question 32

market shortage

Answer 32

The amount by which the quantity demanded exceeds the quantity supplied at a given price; excess demand.

Question 33

market supply

Answer 33

The total quantities of a good that sellers are willing and able to sell at alternative prices in a given time period, ceteris paribus.

Question 34

market surplus

Answer 34

The amount by which the quantity supplied exceeds the quantity demanded at a given price; excess supply.

Question 35

microeconomics

Answer 35

The study of individual behavior in the economy, of the components of the larger economy.

Question 36

mixed economy

Answer 36

An economy that uses both market signals and government directives to allocate goods and resources.

Question 37

monopoly

Answer 37

A firm that produces the entire market supply of a particular good or service.

Question 38

net exports

Answer 38

The value of exports minus the value of imports.

Question 39

opportunity cost

Answer 39

The most desired goods or services that are forgone to obtain something else.

Question 40

per capita GDP

Answer 40

The dollar value of GDP divided by the total population; average GDP.

Question 41

price ceiling

Answer 41

Upper limit imposed on the price of a good.

Question 42

price floor

Answer 42

Lower limit set for the price of a good.

Question 43

product market

Answer 43

Any place where finished goods and services (products) are bought and sold.

Question 44

production possibilities

Answer 44

The alternative combinations of final goods and services that could be produced in a given time period with all avaliable resources and technology.

Question 45

productivity

Answer 45

Output per unit of input, such as output per labor-hour.

Question 46

scarcity

Answer 46

Lack of enough resources to satisfy all desired uses of those resources.

Question 47

shift in demand

Answer 47

A change in the quantity demanded at any (every) given price.

Question 48

substitute goods

Answer 48

Goods that substitute for each other; when the price of good x rises, the demand for good y increases, ceteris paribus.

Question 49

supply

Answer 49

The ability and willingness to sell (produce) specific quantities of a good at alternative prices in a given time period, ceteris parabus.