Unit 1: Introduction to Economics and Microeconomics Vocab

Question 1

Microeconomics

Answer 1

• focuses on individual decision-making units and how they interact

Question 2

Macroeconomics

Answer 2

• explores the economy as a whole

Question 3

Scarcity

Answer 3

• the fixed amount of goods or services available

Question 4

Traditional economy

Answer 4

• an economic system in which traditions, customs, and beliefs help shape the goods and services the economy produces, as well as the rule and manner of their distribution also referred to as a subsistence economy, a traditional economy is defined by bartering and trading
• a system that relies on customs, history, and time-honored beliefs.

Question 5

Command economy

Answer 5

• an economic system in which the means of production are publicly owned and economic activity is directed by a central government or portion of the government
• an economic system in which activity is controlled by a central authority and the means of production are publicly owned.

Question 6

Market economy

Answer 6

• an economic system in which the forces of supply and demand determine what goods and services are produced
• an economic system where two forces, known as supply and demand, direct the production of goods and services.

Question 7

Mixed economy

Answer 7

• an economy that practiced characteristics of both command and market economies; supply and demand largely influence the economy, but there is government intervention to meet certain economic goals

Question 8

Opportunity cost

Answer 8

• the cost of choosing; what you give up by choosing one option
• the loss of potential gain from other alternatives when one alternative is chosen.

Question 9

Goods

Answer 9

• objects that can fulfill human wants/needs, provide utility

Question 10

Services

Answer 10

• economic activity that is intangible; provides utility, but cannot be stored

Question 11

Endowment

Answer 11

• natural and human resources from which all goods and services must be produced

Question 12

Utility

Answer 12

• satisfaction; economists assume maximizing this drives individual choice; measured in utils
• the total satisfaction or benefit from consuming a good or service.

Question 13

Profit motive

Answer 13

• the tendency of people to engage in activities that will lead to monetary gain

Question 14

Consumer sovereignty

Answer 14

• the economic power of the individual in a free market
• the economic concept that the consumer has some controlling power over goods that are produced, and the idea that the consumer is the best judge of their own welfare.

Question 15

Government Regulation

Answer 15

• requirements the government places on private firms and individuals to achieve the government’s goals

Question 16

Social & economic goals

Answer 16

• Freedom
• Security
• Equity
• Growth
• Efficiency
• Stability

Question 17

Marginal utility

Answer 17

• additional increment of utility associated with consuming one more unit of a good or service
• the added satisfaction that a consumer gets from having one more unit of a good or service. The concept of marginal utility is used by economists to determine how much of an item consumers are willing to purchase.

Question 18

Margin

Answer 18

• in a succession of units, the specific unit you are focusing on

Question 19

Total utility

Answer 19

the total satisfaction derived from consuming a specific quantity of a good or service; the total of marginal utilities for all individual units consumed

Question 20

Satiate

Answer 20

satisfy

Question 21

Initial decision

Answer 21

over-simplified decision-making process based on utility (consume until marginal utility =0)

Question 22

Bliss point

Answer 22

maximization of utility

Question 23

Marginal analysis

Answer 23

evaluating the impact of one additional unit

Question 24

Util

Answer 24

a measure of utility (this is an abstract concept)

Question 25

Diminishing marginal productivity

Answer 25

initially, one input increases the initial successive units of input toward the output, but eventually this will add to less output

Question 26

Balancing at the margin

Answer 26

maximizing utility in light of scarcity

Question 27

Discounting the future

Answer 27

utility diminishes the further in the future that utility is realized