FLVS Module 1 Vocab

Question 1

ceteris paribus

Answer 1

“all other things being equal” - helps simplify the real world so economists can study it

Question 2

Command Economy

Answer 2

An economy in which the government makes all economic decisions about how the factors of production are used

Question 3

Market Economy

Answer 3

The forces of supply and demand determine how economic questions will be answered

Question 4

Traditional Economy

Answer 4

An economy in which economic decisions are made based on tradition

Question 5

Factors of production

Answer 5

Land, labor, capital, entrepreneurial ability

Question 6

Resources

Answer 6

Land, labor, capital, entrepreneurial ability

Question 7

Entrepreneurship

Answer 7

The intelligence, imagination, and ability to take the risks that are needed to start up and maintain a business

Question 8

Normative Economics

Answer 8

Describes the way things should be

Question 9

Positive Economics

Answer 9

Describes the way things are

Question 10

Scarcity

Answer 10

When there are not enough resources to satisfy our unlimited needs and wants

Question 11

Opportunity Cost

Answer 11

The value of the next best alternative

Question 12

Production Possibilities Curve/frontier

Answer 12

A graphic representation of the production relationship between two foods

Question 13

Capital goods

Answer 13

Goods used in the production process

Question 14

Consumer goods

Answer 14

Goods used by people in their day to day lives

Question 15

Absolute Advantage

Answer 15

The ability to produce a good or service more efficiently or with fewer resources

Question 16

Comparative Advantage

Answer 16

The ability to produce a good or service at a lower opportunity cost than another nation

Question 17

Demand

Answer 17

how much of a good or service consumers are willing and able to purchase at every price level

Question 18

Quantity Demanded

Answer 18

how much of a good or service consumers are willing and able to purchase at one price level

Question 19

Law of Demands

Answer 19

there is an inverse relationship between price and quantity demanded

Question 20

Income Effect

Answer 20

the price of a good affects the amount of a good or service a consumer is willing and able to purchase

Question 21

Substitution Effect

Answer 21

a consumer will substitute a cheaper product for a more expensive one

Question 22

Complements

Answer 22

Goods whose demand is dependent upon the change in price of another good

Question 23

Substitutes

Answer 23

when the price of one good increases, the demand for the substitute good will increase

Question 24

Supply

Answer 24

How much of a good or service producers are willing and able to supply at every price

Question 25

Quantity Supplied

Answer 25

How much of a good or service producers are willing and able to supply at one price level

Question 26

Law of supply

Answer 26

There is a direct relationship between price and quantity supplied

Question 27

Equilibrium

Answer 27

The intersection of two economic lines such as supply and demand where quantity supplied and demanded are equal at a specific price

Question 28

Shortage

Answer 28

When quantity demanded is greater than quantity supplied

Question 29

Surplus

Answer 29

When quantity supplied is greater than quantity demanded

Question 30

Price ceiling

Answer 30

When government sets a price below equilibrium

Question 31

Price floor

Answer 31

When government sets a price above equilibrium