Unit 1

Question 1

Economics (def)

Answer 1

study/science of scarcity and how businesses, individuals, and the govt. deal with it

Question 2

scarcity

Answer 2

having unlimited wants, but limited resources. It requires us to make choices

Question 3

marginal

Answer 3

in the moment

Question 4

PPC curve

Answer 4

models alternative ways that an economy can use its resources. It can demonstrate scarcity, trade-offs, opportunity costs, and efficiency

Question 5

What are the 4 Key Assumptions (PPC curve)?

Answer 5

1. Only 2 goods can be produced
2. There is full employment of resources
3. There are fixed resources
4. There is fixed technology

Question 6

Constant Opportunity Cost

Answer 6

Resources are easily adaptable for producing either good

Question 7

the invisible hand

Answer 7

society benefits from people acting in their own self-interest

Question 8

free market

Answer 8

buyers and sellers meet to exchange goods and services with no govt. intervention

Question 9

characteristics of a free market

Answer 9

-no govt. intervention
-supply and demand drive production
-all goods are produces in the private sector

Question 10

positive statement

Answer 10

based on facts

Question 11

normative statement

Answer 11

based on opinion or subjective values

Question 12

Thinking at the margin

Answer 12

making decisions in increments

Question 13

price

Answer 13

amount buyer (or consumer) pays

Question 14

cost

Answer 14

amount seller pays to produce a good

Question 15

investment

Answer 15

money spent by businesses to improve their production

Question 16

capital good

Answer 16

good used to produce another good

Question 17

demand

Answer 17

different quantities of goods that consumers are willing and able to buy

Question 18

Law of Demand (basic def)

Answer 18

there is an inverse relationship between price and quantity demanded

Question 19

Substitution effect

Answer 19

If the price increases, a person might buy less of that product or a dupe (substitute)

Question 20

Income Effect

Answer 20

If a product’s price decreases, it gives the consumer more purchasing power, allowing them to buy more of that product

Question 21

Law of diminishing marginal utility

Answer 21

the more you buy of any good, the less satisfaction a consumer will have

Question 22

5 shifters of demand

Answer 22

1. taste/preferences
2. number of consumers
3. price of related goods
4. income
5. future expectations

Question 23

substitutes

Answer 23

goods used in place of another

Question 24

complements

Answer 24

two goods that are often bought and used together

Question 25

normal good

Answer 25

luxury cars, homes, jewelry, etc.

Question 26

inferior goods

Answer 26

used cars, top ramen, etc.

Question 27

supply

Answer 27

different quantities of a good that sellers are willing and able to sell (produce) at different prices

Question 28

law of supply

Answer 28

there is a direct (positive) relationship between price and quantity supplied

Question 29

5 shifters of supply

Answer 29

1. prices/availability of inputs
2. number of sellers
3. technology
4. govt. action- taxes and subsidiaries
5. expectations of future profit