The Economic Way of Thinking

Question 1

desires that can be satisfied by consuming a good or service

Answer 1

wants

Question 2

things such as food, clothing, and shelter, that are necessary for survival

Answer 2

needs

Question 3

the situation that exists when there are not enough resources to meet human wants

Answer 3

scarcity

Question 4

the study of how people choose to use scarce resources to satisfy their wants

Answer 4

economics

Question 5

central to the use of scarce resources

Answer 5

choice

Question 6

physical objects that can be purchased, such as food, clothing, and furniture

Answer 6

goods

Question 7

work that one person performs for another for payment

Answer 7

services

Question 8

a person who buys goods or services for personal use

Answer 8

consumer

Question 9

a person who makes goods or produces services

Answer 9

producer

Question 10

3 Economic Questions

Answer 10

1. How will it be produced?
2. What will be produced?
3. For whom will it be produced?

Question 11

the resources needed to produce goods and services. Divided into 4 categories: land, labor, capital, entrepreneurship

Answer 11

Factors of Production

Question 12

includes all the natural resources that are found underground that are used to produce good and services

Answer 12

land

Question 13

all the human time, effort, and talent that go into the making of the products

Answer 13

labor

Question 14

all the resources made and used by people to produce and distribute goods and services

Answer 14

capital

Question 15

the knowledge and skills gained through experience

Answer 15

human capital

Question 16

Factors that shape economic choice:

Answer 16

1. incentives

2. utility

Question 17

To _____ means to make decisions according to the best combination of cost and benefits

Answer 17

economize

Question 18

Every choice involves ____

Answer 18

cost

Question 19

can take the form of money, time, or some other thing you value

Answer 19

costs

Question 20

don’t require all or nothing choices, rather they involve giving up some of one thing to gain more of another

Answer 20

trade-offs

Question 21

the value of the next-best alternative, or what you give up by choosing one alternative over another

Answer 21

Opportunity costs

Question 22

the practice of examining the costs and the expected benefits of a choice as an aid to decision making

Answer 22

cost-benefit analysis

Question 23

______ is one of the most useful tools for individuals when they need to evaluate the relative worth of economic choices

Answer 23

cost-benefit analysis

Question 24

the simplest application of cost-benefit analysis

Answer 24

decision-making grid

Question 25

The _____ shows what you get and what you give up when you make a choice

Answer 25

decision-making grid

Question 26

the additional cost of using one more unit of product

Answer 26

Marginal cost

Question 27

the additional satisfaction from using one or more unit of a product

Answer 27

marginal benefit

Question 28

The ______ is a graph used by economist to show the impact of scarcity on an economy

Answer 28

Product Possibilities Frontier (PPF)

Question 29

The PPF is based on assumptions that simplify economic interactions:

Answer 29

• Resources are fixed
• All resources are fully employed
• Only 2 things can be produced
• Technology is fixed

Question 30

Latin phrase used in economics to mean all other things being held equal or constant

Answer 30

Ceteris paribus