Key terms

Question 1

Oligopoly

Answer 1

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

Question 2

Monopoly

Answer 2

power of being the only seller

Question 3

Monopsony

Answer 3

power of being the only buyer; not a price taker

Question 4

Risk

Answer 4

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

Question 5

Supply

Answer 5

the quantity supplied at certain prices; different than quantity

Question 6

Demand

Answer 6

attitude of those in the market buying

Question 7

Firm

Answer 7

business or organization (owned by an individual)

Question 8

Factor markets

Answer 8

the exchange of inputs we produce

Question 9

Product markets

Answer 9

the exchange of goods and services

Question 10

Market power

Answer 10

a condition in which an individual or firm has an unfair advantage (decreases efficiency)

Question 11

Equal access to information

Answer 11

limits market power

Question 12

Pareto Optimality

Answer 12

a situation where there is no way to make someone better off without making someone worse off (highest efficiency)

Question 13

Elasticity

Answer 13

amount that demand responds to market conditions

Question 14

Inelastic

Answer 14

insignificant change in demand regardless of market conditions

Question 15

Necessity

Answer 15

a good for which there are no substitutes; more inelastic; e.g healthcare, gasoline

Question 16

Luxury

Answer 16

more elastic

Question 17

Unitary elasticity

Answer 17

percentage change in quantity and price are equal

Question 18

Microeconomics

Answer 18

focuses on individual decision-making units and how they interact.

Question 19

Macroeconomics

Answer 19

explores the economy as a whole

Question 20

Total revenue

Answer 20

price X quantity

Question 21

Scarcity

Answer 21

the fixed amount of goods or services available

Question 22

Price sensitive

Answer 22

significantly elastic demand in which demand is more dependent on price

Question 23

Shift variables

Answer 23

factors that alter changes in demand

Question 24

Traditional economy

Answer 24

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 25

Price of related goods

Answer 25

a variable that is impacted by complements and substitutes (related goods)

Question 26

Complements

Answer 26

items that are often consumed together (e.g. french fries & ketchup)

Question 27

Command economy

Answer 27

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 28

Substitutes

Answer 28

goods that can replace the utility of another good (e.g. Pepsi & Coke)

Question 29

Market economy

Answer 29

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

Question 30

Cross price elasticity

Answer 30

how much a quantity demand change in one good impacts the price of another good

Question 31

Mixed economy

Answer 31

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 32

Opportunity cost

Answer 32

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

Question 33

income elasticity (of demand

Answer 33

how much the quantity demanded of a good of services changes as a result of income

Question 34

Goods

Answer 34

objects that can fulfill human wants/needs, provide utility

Question 35

Normal goods

Answer 35

any good in which demand increases as income increases

Question 36

Services

Answer 36

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

Question 37

Inferior goods

Answer 37

any good in which demand decreases as income increases

Question 38

Endowment

Answer 38

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

Question 40

Utility

Answer 40

satisfaction; economists assume maximizing this drives individual choice; measured in utils

Question 41

Profit motive

Answer 41

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

Question 42

Consumer sovereignty

Answer 42

the economic power of the individual in a free market

Question 43

Government regulation

Answer 43

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