Brainscape's Knowledge GenomeTM


Top Flashcards (Certified)
All Flashcards

Principles Of Microeconomics > Test #1 > Flashcards

Test #1 Flashcards

1
Q

Define Opportunity Costs

A

To obtain more of one thing, society sacrifices the opportunity of getting the next best thing that could have been created with those resources.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What is utility?

A

The pleasure, happiness, or satisfaction obtained from consuming a good or service

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What is marginal analysis?

A

Comparisons of marginal benefits and marginal costs, usually for decision making.
-When economists make decisions, they must see if the benefit of spending extra money on something exceeds the cost to buy it.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What does marginal mean to economists?

A

Marginal = Extra/additional ex extra costs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What is an economic principle?

A

A statement about economic behavior or the economy that enables prediction of the probably effects of certain actions

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is the other-things-equal assumption?

A

The assumption that factors other than those being considered do not change.
-Ex: Taking into account consumer preferences when looking at the relationship of price of Pepsi to the amount of Pepsi purchased
(avoids confusion)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Define Microeconomics?

A

Concerned with decision making by individual customers, workers, households, and business firms.
-Concerned with the specifics, such as the price of certain products, revenue of particular households, etc

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Define Macroeconomics

A

Examines the performance and behavior of the economy as a whole
-Ex: Economic growth, business cycles, etc.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What is the difference between positive and normative economics?

A
  • Positive economics: Focuses on facts and cause-effect relationships (what is)
  • Normative economics: Incorporates value judgements of what the economy should be like or what policy actions should be recommended. (what ought to be)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What is a budget line?

A

Graph curve that shows various combinations of two products a consumer can purchase with a specific income. (anything inside the budget line is attainable, while anything outside is not)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What are comic resources?

A

All natural, human, and manufactured resources that go into the production of goods and services
-These resources are classified into: Land, labor, capital, and entrepreneurial ability

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What is a production possibilities table?

A

Lists the different combinations of two products that can be produced with a specific set of resources.
-Idea is sacrificing some of one good to obtain another good

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is a production possibilities curve?

A

Shows the data in production possibilities table graphically

  • Curve displays the different combinations of goods and services that society can produce in a fully employed economy
  • Each point represents a different maximum combination of two products if resources are fully employed
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

The number of one product that must be given up to obtain more of a different product is the ____

A

opportunity cost of that product

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What is the law of increasing opportunity costs?

A

As the production of a particular good is increased, the opportunity cost of producing and additional unit rises (because more of that unit can be made now)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What is the relationship between marginal benefit and marginal cost?

A
  • If MB > MC, economic activity should be expanded
  • if MC > MB, economic activity should be decreased
  • if MC = MB, this is optimal activity
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

How is MB and MC represented in graph form?

A

MC and MB are equal at the intersection of line MC and MB.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What do points inside the original productions possibilities curve represent?

A

They represent situations where there is unemployment and the economy would produce less than the alternatives shown on the table

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What would a greater abundance of resources being outputted than normal look like on a production possibilities curve?

A

Production possibilities curve shifts outward and to the right

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What is Laissez Faire-Capitalism?

A

The government’s role is limited to protecting private property and establishing a legal environment in which contracts are enforced and people interact in markets to buy and sell goods, and resources
-Very limited government interference with economy

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

What is the command system?

A

Government owns most property resources, and economic decision making is set by a central economic plan created and enforced by the government.

  • Gov owns business firms, etc
  • Utilized in countries with socialist or communist governments
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

What is the market system?

A
  • Capitalism or mixed economy
  • Mixture of centralized gov economic initiatives and decentralized actions by individuals and firms.
  • Private individuals and firms own most of property resources (land and capital) in this system
  • Resources can be used as businesses see fit
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

What is freedom of enterprise?

A

Entrepreneurs and private businesses can can use economic resources to produce their choice of goods and services

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

What is freedom of choice?

A

Allows owners to employ or dispose of their property and money as they see fit.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
What is consumer sovereignty?
Consumers control quantity of goods produced
26
What is creative destruction?
The creation of new products and production methods destroys older products
27
What is the "invisible hand"?
firms and resource supplies are guided by an invisible hand that promotes public interest
28
What is the circular flow diagram?
Illustrates the dynamic market economy's repetitive flow of goods and services
29
Describe what is a sole proprietorship, partnership, and corporation?
- Sole proprietorship: Single person - Partnership: two or more individuals - Corporation: independent legal entity
30
What is a product vs resource market?
Product: Households purchase goods and services produced by businesses Resource: Households sell resources to businesses
31
What is the demand schedule?
Curve that shows the various amounts of a product the consumers are willing and able to purchase at a series of possible prices during a specified period of time -Lesser the price = more demanded
32
What is the law of demand?
As price falls, the quantity demanded rises | -As price rises the quantity demanded falls
33
What is the income effect?
Indicates that a lower price increases the purchasing power of a buyer's money income, enabling the buyer to purchase more of that product
34
What is the substitution effect?
suggests that buyers have an incentive to substitute a product whose price has fallen for other products whose prices have remained the same
35
What is the demand curve?
Inverse relationship between price and quantity demanded represented in graph form
36
What is a determinant of demand?
Other factors that affect purchases besides price | -When determinants change, the demand curve shifts to the right or left
37
What is a normal good vs inferior good?
- Normal: Products whose demand varies directly with money income - Inferior: Goods whose demand varies inversely with money income
38
What is the difference between complementary and substitute goods?
-Complementary are used with another good, substitute are used in place of another good
39
What doe a change in demand imply?
implies a change in demand curve
40
What is a change in quantity demanded?
Movement from one point to another, along a fixed curve
41
What is the supply schedule?
Curve showing the various amounts of a product that producers are willing and able to make available for sale at each series of possible prices during a specific period
42
What is the law of supply?
As price rises, the quantity supplies rises -As price falls, the quantity supplied falls (if the price of of corn is high the farmer will plant more corn because it'll make him more money)
43
What is the supply curve?
Price-quantity represented graphically | -Upward slope of curve represents producers offering more of a good for sale as its price rises on the market
44
What are the determinants of supply?
resource prices, technology, taxes and subsidies, prices of other goods, producer expectations, and number of sellers on the market
45
What does a change In demand imply?
An increase in supply shifts the curve to the right
46
What is the equilibrium quantity?
Quantity at which the intentions of buyers and sellers match
47
What is a surplus?
Excess supply | -Surpluses drive prices down
48
What is productive efficiency?
Production of any particular good in the least costly way
49
What is allocative efficiency?
Particular mix of goods and services most highly values by society
50
What is a price ceiling?
Maximum legal price a seller may charge for a product or service
51
What is a price floor?
Minimum price set by the government
52
What is the price elasticity of demand?
Consumers responsiveness to a price change
53
What is elastic vs inelastic?
- Elastic: When modest price changes cause drastic changes in quantity purchased - Inelastic: Price changes only cause small changes in the amount purchased
54
What is the equation for determining if the demand is price elastic or inelastic?
Ed = change in price of x /original price of x
55
What is the equation for determining if the demand is price elastic or inelastic when there is a change in price?
Ed = (change in quantity /(sum of quantities/2)) /(change in price/(sum of price/2))
56
How can you tell if the demand is elastic or inelastic?
- if Ed > 1, it is elastic - if Ed < 1, it is inelastic - If Ed = 1, it is unit elastic
57
What is perfectly elastic and perfectly inelastic?
- If the price change results in no change to the quantity demanded, this is perfectly inelastic - If the price reduction causes buyers to increase purchases from zero to maximum, this is perfectly inelastic
58
What is the total revenue test and what is the equation for it?
Total amount the seller receives from the sale of a product in a particular time period. -Product price x quantity sold, or TR = P x Q
59
What is the easiest way to determine if a demand is elastic or inelastic?
total-revenue test - if total revenue changes in the opposite direction from price, demand is elastic - if revenue change sin the same direction, it is inelastic
60
What is price elasticity, and what is the equation?
If quantity supplied by producers is responsive to price change, supply is elastic. -If not, it is inelastic Es = Percentage change in quantity supplied of product x / percentage change in price of product x
61
What is the immediate market period?
Length of time over which producers are unable to respond to a change in price with a quantity supplied
62
What is cross elasticity of demand and what is the equation?
Measures the sensitivity of consumer purchases of one product to a change in the price of some other product - Exy = Percentage change in quantity demanded of product x/ percentage change in price of product y
63
What is income elasticity of demand and what is the equation?
Measures the degree to which consumers respond to a change in their incomes by buying more or less of a particular good -Ei = percentage change in quantity demanded/ percentage change in income

Principles Of Microeconomics (1 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions