Unit 1: Chapter 1: What is Economics?

Question 1

What necessitates choices?

Answer 1

Insatiable desire (unlimited wants) and scarcity of resources (finite number)

Question 2

Define the Term: Insatiability

Answer 2

Unlimited wants

Question 3

Scarcity

Answer 3

The recognition that there are a limited amount of resources - they are not infinite

Question 4

As Christians we struggle make sure that:

Answer 4

Our struggle between unlimited wants and finite resources match God’s priorities

Question 5

What does Economics come from in the greek?

Answer 5

Oikos - House & Nomos - Management of

Question 6

Define the Term: Economic Cost

Answer 6

Value that people place on a good or service

Question 7

Define the Term: Good

Answer 7

Any tangible item that has a measurable lifespan

Question 8

Define the Term: Service

Answer 8

Intangible products that have some economic cost

Question 9

Define the Term: Economic Goods/Services

Answer 9

Items that have a positive economic cost (cost money to buy/purchase)

Question 10

Define the Term: Nuisance goods

Answer 10

Goods that require you to pay to have them removed

Question 11

Explain the Diamond-Water Paradox

Answer 11

The idea that despite an objects intrinsic value, it’s subjective value may result in it being worthless. I.E. a bottle of water in the desert vs a handful of diamonds

Question 12

Define the Term: Intrinsic value

Answer 12

The value something has because of the resources needed to acquire it.

I.E. high labor to get the good will increase its intrinsic value

Question 13

Define the Term: Subjective Value

Answer 13

The value something has because of the wants, desires, and situation that the subject (person deciding) currently has based on their circumstances

Question 14

Define the Term: Opportunity Benefit

Answer 14

Satisfaction you receive from the choices you make

Question 15

Define the Term: Opportunity Cost

Answer 15

The satisfaction you give up or the regret you experience for NOT choosing differently

Question 16

What is the difference between Economic Cost Opportunity Cost?

Answer 16

Economic Cost is what things cost in resources, Opportunity Cost is an internal feeling about a choice or opportunity not made/taken

Question 17

Define the Term: Microeconomics

Answer 17

Dealing with choices made by individuals, households, individual business, and effects on those parties

Question 18

Define the Term: Macroeconomics

Answer 18

Dealing with large-scale economic choices and issues. Bank interest rates, unemployment, and international commerce

Question 19

Define the Term: Positive Economics

Answer 19

Observing economic choices and predicting economic events

Question 20

Define the Term: Normative Economics

Answer 20

Making value judgements about existing or proposed economic policies

Question 21

What does a budget do?

Answer 21

Tell your money where to go

Question 22

Why is a budget useful

Answer 22

Restricts impulse buying
Allows you to set and work towards long term goals
Creates stability in relationships

Question 23

Explain Fixed vs Variable Expenses

Answer 23

Fixed expenses don’t move month to month. Variable Expenses change based on use/consumption