Midterm Review Flashcards
Deciding whether to do or use one additional unit of some resource
Thinking at the Margin
A phrase that refers to the trade offs that nations face
Guns or Butter
An ambitious leader who creates new goods and services
Entrepreneur
All human made goods that are used to produce other goods
Physical Capital
The effort people devote to a task
Labor
Physical objects such as food or phones, etc.
Goods
An item we desire but is not essential to live
Want
The common sense science of how and why people, businesses, and governments make the choices they do.
Economics
Everything that is finite or limited in quantity
Scarcity
Using wisely and well what God has given
Stewardship
A tangible, physical thing that has a measurable life span
Good
What we determine the nature of the product to be
Intrinsic Value
Also known as a schedule, and a popular method of explaining simple relationships between pairs
Tabular Model
Contains a horizontal and vertical axis
Line Graph
Provides a complete visual explanation of how a complete national economic system functions
Circular Flow Model
Land, labor, capital, and entrepreneurship
Factors of Production
The payment made on borrowed money
Interest
When government spending exceeds what it receives in taxes
Budget Deficit
The difference between revenues received and cost that go into production
Profit
All payments for labor
Wages
The activity of creating new and useful goods and services
Consumption Expenditures
Household spending on goods and services
Principal of Diminishing Marginal Utility
A graph that shows alternative ways to use an economy’s resources
Production Possibilities Curve
The willingness of consumers to purchase a product and the actual act of purchasing it
Demand
Goods that experience an increase in demand because of an increase in consumer income
Normal Goods
Goods that households may use in place of others
Substitute Good
Goods that are usually purchased or used together
Complementary Goods
Items that see a decline in sales as consumer income increases
Inferior Goods
When a demand curve shifts to the left or the right
Change in Demand
When the government dictates that prices may not rise any higher
Price Ceilings
A barrier that prevents prices from falling below the market price
Price Floor
The price at which consumers are willing to take from the market the exact quantity of a product that suppliers will put in the market
Market Equilibrium Price
The willingness of businesses to produce more of their product at any given price
Increase in Supply
Supply fluctuations
Changes in Supply
What is the difference between and economic and opportunity cost?
Economic cost is the value people place on a good or service and is reflected by its price. Opportunity cost is the satisfaction a person gives up or the regret experienced by not choosing differently
Why do insatiability and scarcity necessitate choice?
Choices are necessary because they pull a person in opposite directions. Both cannot be satisfied.
Explain and give an example of any three of the following: good, service, free good, nuisance good, economic good, economic service, free service.
Good: any tangible thing that has a measurable lifespan - a textbook
Service: intangible items - work of a teacher
Free good: goods with a price tag of 0 - air
What is the difference between microeconomics and macroeconomics? Give examples of each.
Micro: choices made by individual units - what causes a person to save money?
Macro: large scale economic choices - what causes bank interest rates to rise and fall?
What character quality is essential for the Christian to have victory over insatiability?
Contentment
What are two purposes for economic models?
Instruction and prediction of future events
For an economist, what is the primary value of a production possibilities curve?
A PPC enables the economist to see the maximum feasible amounts that a business can produce with its limited resources
Name the four factors or production or the four payments businesses make in exchange for the factors of production.
Land, labor, capital, entrepreneurship
Rent, wages, interest, profit
Why is the financial market necessary for the effective functioning of a developed society?
Financial market takes the savings of households and channels them to businesses so that the financial capital can help business firms operate effectively
With what economic principle do we most often associate Ludwig vos Mises?
Free Market
Who identified the principle of diminishing marginal utility?
William Stanley Jevons
State the law of demand
Everything else being held constant, the lower the price charged for a good or service, the greater the quantity people will demand and vise versa
When an individual makes a decision at the margin, how does he determine the amount to obtain?
The individual chooses to obtain the amount at which the marginal benefit just offsets the marginal cost
What four conditions may change the demand for a product?
Change in people’s incomes
Change in the price of related goods
Change in peoples taste and preferences
Change in people’s expectations
What are the three fictions of prices?
Transmit info, provide incentives, redistribute income
State the law of supply.
The higher the price buyers a willing to pay, other things being constant, the greater the quantity a supplier will be willing to produce and the inverse is true
What occurs when the price of a product is higher than the price at which supply equals demand?
Surplus
What is the simplest solution to a surplus?
The producer lowers the price until the quantity demanded equals the quantity he has to supply
Which way does a supply curve slope and why?
Upward to the right indicating that the greater the price buyers are willing to pay for the product the greater quantity firms will supply
What three factors could lead to a change in supply?
Changes in technology
Change in production cost
Changes in the prices of related goods
Opportunity benefit is the regret you feel over a choice you made.
False
Positive economics refers to making value judgements about existing or proposed economic policies.
False
Normative economics observes economic choices and predicts economic events.
False
Menger proposed that an individual’s decisions are based on personal utility.
True
Economics is considered a science.
True
A line graph provides more data than a tabular model.
True
On a PPC, the point on the curve represents inefficient production.
False
Financial capital is the tool that business firms use to produce goods and services.
False
Entrepreneurship is the most important factor of production.
True
Transfer payments involve the government.
True
If the government receives less in taxes than it is paying out, it is operating under a budget surplus.
False.
Dissaving is any time households withdraw money from an account or borrow it.
True
Crowding out has nothing to do with governmental budget deficits.
False
A financial market is the collection of a nation’s financial institutions.
True
Inferior goods increase in sales as consumer income increases.
False
When a demand curve stays the same, economists say that the product is experiencing a change in demand.
False
Whenever a change in price cause a change in the number of items demanded, a change in quantity demanded has occurred.
True
US currency is currently based on gold and silver.
False
According to the World Factbook, the USA now has the 3rd largest GDP (gross domestic product) in the world.
True
The principal of diminishing marginal utility states that people tend to receive less and less additional satisfaction from any good or service as they receive more and more of it during a specific period of time.
True
Complementary goods work best when separated.
False
China has the largest GDP in the world.
True
The average American has no idea how bad our debt situation is.
True
A shift to the right on a supply schedule generally means that a decrease in supply has occurred.
False
When a supply schedule is plotted on a graph, it is called a supply curve.
True
Supply is the amount of goods and services business firms are willing and able to provide at different prices.
True
The point at which buyers and sellers disagree is called the Market Equilibrium point.
False
A surplus is an excess of unsold products
True
