Unit 1 Introduction to Economics

Question 1

social science

Answer 1

the academic study of society and human behavior

Question 2

microeconomics

Answer 2

examines the behavior of individual decision-making units in the economy

Question 3

two main groups of decision makers

Answer 3

consumers, producers

Question 4

macroeconomics

Answer 4

examines the economy as a whole to obtain a broad or overall picture of the economy

Question 5

scarcity

Answer 5

the idea that resources are insufficient to satisfy unlimited human needs and wants

Question 6

economics

Answer 6

the study of how our scarce resources can best be used in order to satisfy the needs and wants of human beings

Question 7

efficiency

Answer 7

refers to making the best possible use of scarce resources to avoid resource waste

Question 8

equity

Answer 8

the idea of being fair/just

Question 9

economic well-being

Answer 9

the levels of prosperity, economic satisfaction, and standards of living among the members of a society

Question 10

sustainability

Answer 10

the ability of the present generation to satisfy its needs by the use of resources and non-renewable resources without limiting future generations’ ability to satisfy their own needs

Question 11

change in economics

Answer 11

the economic world is in a continual state of flux, it is subject to continuous/profound change at technological, economic and social levels

Question 12

interdependence

Answer 12

refers to the idea that economic decision-makers interact with and depend on each other for the achievement of their economic goals

Question 13

intervention

Answer 13

the government becomes involved with the workings of markets, because markets on their own often cannot achieve important societal goals

Question 14

three basic economic questions

Answer 14

what to produce? how to produce? for whom to produce?

Question 15

factors of production

Answer 15

land, labor, capital, entrepreneurship

Question 16

land

Answer 16

all natural resources e.g. minerals, forests, rivers, underground water

Question 17

labor

Answer 17

physical and mental effort of workers to produce a good or service

Question 18

capital

Answer 18

machinery, tools, factories, airports, power plants

Question 19

entrepreneurship

Answer 19

risk-taking, human skill to organize the other three factors to produce a good or service

Question 20

opportunity cost

Answer 20

the next best alternative foregone when an economic decision is made

Question 21

free goods

Answer 21

things such as air and salt water that are not limited in supply (yet)

Question 22

centrally planned economies

Answer 22

an economic system in which governments decide what to produce, how to produce it, and who receives it

Question 23

disadvantages of centrally planned economies

Answer 23

little economic efficiency, freedom, growth, and equity

Question 24

laissez-faire/market capitalism

Answer 24

an economic system in which individuals and firms allocate resources and production resources are privately owned

Question 25

disadvantages of market capitalism

Answer 25

anything can be produced, ethical values are neglected, lack of sustainability

Question 26

public resources

Answer 26

the parts of the economy that are under the ownership of the government/state

Question 27

private resources

Answer 27

the parts of the economy that are under the ownership of groups of individuals e.g. consumers (households), firms (businesses)

Question 28

Karl Marx

Answer 28

philosopher who believed that capitalism was unsustainable and flawed for most people

Question 29

what PPC stands for

Answer 29

production possibility curve

Question 30

what the PPC represents

Answer 30

the maximum production output obtained with full employment resources

Question 31

what the PPC shows

Answer 31

scarcity, law of increasing opportunity cost, a perfectly efficient economy produces on the curve, economic growth = outward curve

Question 32

law of increasing opportunity cost

Answer 32

to produce more of one good, a successively larger amount of the other good must be sacrificed

Question 33

“pick the lowest hanging lemons first”

Answer 33

use the labor units that will result in the cheapest opportunity cost first

Question 34

constant opportunity cost

Answer 34

a situation in which the production of two different goods is the same, linear graph

Question 35

actual growth

Answer 35

a movement inside the PPC caused by a reduction in unemployment and higher efficiency

Question 36

growth in production possibilities

Answer 36

an outward shift of the PPC caused by an increase of FOPs/quality of FOPs

Question 37

national income

Answer 37

the sum of all final goods and services produced in a year, in terms of national currency

Question 38

flow

Answer 38

an economic measure over a period of time

Question 39

expenditure

Answer 39

money used for production output

Question 40

leakages

Answer 40

the savings, taxes, and import spending that remove spending from the circular flow of income

Question 41

injections

Answer 41

the investment, government spending, and export revenues that add spending to the circular flow of income

Question 42

normative statements

Answer 42

subjective statements that can contain biases and cannot be proven right or wrong

Question 43

value judgement examples

Answer 43

“should”, “fair”, “too much”

Question 44

positive statements

Answer 44

objective statements that are testable where a dependent variable is quantified and measured

Question 45

utility

Answer 45

the satisfaction we gain when we buy something

Question 46

marginal benefit

Answer 46

the benefit that arises from a one unit increase in an activity which is measured by what you are willing to give up to get one additional unit

Question 47

the marginal benefit of an activity______ as you do more of it

Answer 47

decreases

Question 48

logic

Answer 48

a method of reasoning

Question 49

empirical evidence

Answer 49

real-world information, observations, and data that we acquire through our senses and experience

Question 50

refutation

Answer 50

the idea that it must be possible to refute or disprove a hypothesis or theory

Question 51

translation of Ceteris Paribus

Answer 51

“all other things (variables) being equal”

Question 52

use of Ceteris Paribus

Answer 52

allows economists to isolate and study one variable at a time and eliminate all other possible interferences

Question 53

adam smith

Answer 53

introduced the concept that free trade would benefit individuals and society as a whole

Question 54

utilitarianism

Answer 54

an ethical theory that determines right from wrong by focusing on outcomes

Question 55

principle of utility

Answer 55

an ethical theory which established whether something was good or bad according to its benefit for the majority of people

Question 56

Jeremy Bentham

Answer 56

founder of modern utilitarianism

Question 57

say’s law

Answer 57

supply creates its own demand, a theory that claims that the economy tends toward full employment in the absence of any government intervention

Question 58

John Stuart Mill

Answer 58

created a more sophisticated version of utilitarianism where the quality of pleasure and quantity of people doing it is involved

Question 59

20th century - Keynesian Thinking

Answer 59

an economy left on its own would not lead to full employment and the government would have to intervene

Question 60

20th century - The Monetarist

Answer 60

government intervention prevents the economy from reaching a state of full employment on its own

Question 61

21st century - Behavioral Economics

Answer 61

argued that consumers do not have the necessary information available and that the human mind works in irrational ways

Question 62

21st century - The Circular Economy

Answer 62

idea that goods should be produced in a way where they can be repaired rather than thrown away