Unit 1

Question 1

Scarcity

Answer 1

Scarcity is the fact that there are a limited amount of different resources in this world.

Question 2

Choices

Answer 2

Choices are the decisions we make that make us choose what we do with those limited resources.

Question 3

Trade offs

Answer 3

The trade offs are the things we give up by choosing to use our resources in one way over another.

Question 4

Price

Answer 4

Price is the amount of money or services that buyers, spend on a good.

Question 5

Cost

Answer 5

Cost is what the seller/creator of the good pays to produce it.

Question 6

Opportunity cost

Answer 6

Opportunity cost is everything that is given up by choosing one side of a decision.

Question 7

Consumer goods

Answer 7

Consumer goods are any goods that can be readily consumed. An example of this is pizza you buy

Question 8

Capital goods.

Answer 8

A goods that is used in the creation of consumer goods. Like the pizza oven

Question 9

Normative economics

Answer 9

Normative economics is a depiction of how the world should work. It relies of facts, predictions, and hypothesis’

Question 10

Positive economics

Answer 10

Positive economics relies on the cold hard truth and shows how the world actually does work. It relies on numbers and true, provable information

Question 11

Productive efficiency

Answer 11

Being productively efficient just means that the economy is producing at a point along the PPC. This DOES NOT MEAN it is allocatively efficinet

Question 12

Allocative efficiency

Answer 12

is when the economy not only produces on the PPC, but also makes the consumers as well off as possible.

Question 13

Centrally planned economy

Answer 13

A centrally planned economy is an example of communism. In this, the government owns all of the resources and decides the methods of production, what will be produced, and who consumes these goods. provided no monetary gain for anyone and gives no incentive to make high quality goods. A free market economy is one that is run by the individual companies

Question 14

Free market economy

Answer 14

A free market economy is one that is run by the individual companies. It included competition, profit, and the incentive to make better quality goods in a wide variety

Question 15

Product market

Answer 15

The product market is the market that exists when you are selling completed goods to the consumers

Question 16

Resource market

Answer 16

resource market is the market caused by purchasing the goods needed to produce your product.

Question 17

Law of supply

Answer 17

Companies will supply more when there is a higher price

Question 18

Law of demand

Answer 18

People demand more when it costs less

Question 19

Law of diminishing marginal utility

Answer 19

The more you consume of one good, the less it is worth

Question 20

normal good

Answer 20

A good which’s consumption increases as income increases

Ex fancy food

Question 21

Inferior good.

Answer 21

Consumption decreases as income increases

Ex top ramen

Question 22

Substitutes

Answer 22

Two interchangeable goods.
As the price of one rises, the demand for the other rises.
Ex pearls and diamonds

Question 23

Compliments

Answer 23

Two goods used in conjunction
As the price of one decreases, the demand for the other will also decrease
Ex cereal and milk

Question 24

Shifters of demand

Answer 24

1. Number of buyers
2. Income
3. Expectations
4. Price of related goods
5. tastes

Question 25

Shifters of supply

Answer 25

1. Number of sellers.
2. Technology
3. resource prices
4. Taxes and subsidies
5. Expectations of producers
6. Price of other goods the firm could produce

Question 26

Expectation of a sale

Answer 26

Decrease inDemand

Question 27

Workers go on strike

Answer 27

Supply decrease

Question 28

Price of a substitute goes up

Answer 28

Demand increases

Question 29

Workers get a wage increase

Answer 29

Decrease in supply

Question 30

Increase in tastes or trends

Answer 30

Demand increase

Question 31

Workers become more productive

Answer 31

Supply increase

Question 32

Price of a compliment decreases

Answer 32

Demand increases

Question 33

Government imposes tax on manufacturers

Answer 33

Supply down

Question 34

A subsidy

Answer 34

Supply increase

Question 35

Price of the item increases

Answer 35

No shift. Shift along the curve.

Question 36

Another company who sells the same items enters the market

Answer 36

Increase in supply

Question 37

Popularity increases and a new technology developed.

Answer 37

Demand increase, and supply increase

Question 38

Price ceiling

Answer 38

The max price a good can be sold for. Only effective below equilibrium.
Creates a shortage

Question 39

Price floor.

Answer 39

Minimum price a good can be sold for.
Only effective if above equilibrium
Creates a surplus.

Question 40

How to find opportunity cost

Answer 40

Put the opposite value over and simplify

Question 41

How to find specialization of trade

Answer 41

The person with the comparative advantage will produce that good.

Question 42

Comparative advantage

Answer 42

The person with less opportunity cost for that good.

Question 43

Absolute advantage

Answer 43

Who can produce total more of a good.

Question 44

Is trade beneficial

Answer 44

If the trade gives both people more goods than they could get for producing it themselves then it is beneficial. Ex if John gets 4 donuts per one cupcake with trade and can produce 3 without, then trade is beneficial.