unit 1 test Flashcards
1
Q
SCARCITY:
A
- when a resource is not available in sufficient quantities to satisfy all the various ways a society wants to use it
2
Q
four factors of production:
A
- land
- labor
- capital
- entrepreneurship
3
Q
micro vs. macro economics:
A
- micro: the study of how of how individuals, household, and firms make decisions and how they make decisions
- macro: concerned with the overall ups and downs of the economy
4
Q
trade-offs:
A
- you make a trade-off when you give up something in order to have something else
5
Q
opportunity cost:
A
- opportunity lost (the financial or nonfinancial cost of a choice not taken)
6
Q
utility:
A
- total satisfaction received from consuming a good or service
7
Q
marginal:
A
- means having a little more or a little less of something
8
Q
allocate:
A
- the division of things into shares of portions
9
Q
price:
A
- the current price at which an asset or service can be bought or sold
10
Q
cost:
A
- monetary value of a good or a measure of what you are losing when making a decisions
11
Q
profit:
A
- the difference between the revenue a commercial entity has received from its outputs and the opportunity cost of its inputs
12
Q
consumer goods:
A
- sold to consumers for own use or enjoyment
13
Q
capital goods
A
- physical assets that a company uses in production producers to manufacture products and services that consumers will use later
14
Q
investments:
A
- the production of goods that will be used to produce other goods
15
Q
productivity:
A
- measures how efficiently production inputs such as labor and capital are being used in an economy to produce a given level of output
16
Q
production possibilities curve:
A
- illustrates the trade-offs facing an economy that produces only two goods. it shoes the maximum quantity of one good that can be produced for each possible quantity of the other good produced
17
Q
constant opportunity cost:
A
- slope is a straight line
18
Q
increasing opportunity cost:
A
- upward concave and an increase in opportunity cost
19
Q
three PPC shifters:
A
- trade
- change in resource and quantity
- technology
20
Q
capital goods and future growth:
A
- more capital goods = more future growth
- less capital goods = less future growth
21
Q
absolute advantage:
A
- when the seller can produce more output with a given amount of input
22
Q
comparative advantage:
A
- an individual has a comparative advantage in producing something if the opportunity cost of that production is lower for the individual than for other people
23
Q
specialization and trade:
A
- specialization: each person specializes in the task that he or she is good at performing
- trade: they produce goods and services to others and receive good and services in return
24
Q
terms of trade:
A
- indicate the rate at which one good can be exchanged for another
- to find range of mutually beneficial terms of trade - look at each person’s opportunity cost of producing the good
25
Q
demand:
A
- our desire, willingness, and ability to purchase something
26
Q
law of demand:
A
- says that a higher price for a good or service, all other things being equal, leads to people to demand a smaller quantity of that good or service
27
Q
the substitution effect:
A
- the decrease in sales for a product that can be attributed to consumers switching to cheaper alternatives when its price rises
28
Q
the income effect:
A
- more income = more likely to purchase a good or service at any price
- when a rise in income decreases the demand for a good that is an inferior good
29
Q
law of diminishing marginal utility:
A
- as you purchase anything the additional satisfaction provided will decrease as you continue consuming
30
Q
five determinants of demand:
A
- tastes
- prices of related goods
- income
- the number of buyers
- expectations
31
Q
substitutes:
A
- two goods are substitutes if a rise in the price of one of the goods leads to an increase in the demand for the other good
32
Q
normal goods:
A
- the demand for goods increases when consumer income rises
33
Q
complements:
A
- two goods are complements if a rise in the price of one of the goods leads to a decrease in the demand for the other good
34
Q
inferior goods:
A
- the demand for some goods decrease when income rises and these goods are known as inferior goods
35
Q
supply:
A
what businesses are able and willing to sell
36
Q
law of supply:
A
- says that other things being equal, the price and quantity supplied of a good are positively related
37
Q
six determinants of supply:
A
- cost inputs or cost production
- productivity
- technology
- the government
- change in producer expectations
- change in number of producers
38
Q
equilibrium:
A
- when no individual would be better off doing something different
- the price that matches the quantity supplied demanded is the equilibrium price and the quantity bought and sold at that price is the equilibrium quantity
39
Q
disequilibrium:
A
- a loss or lack of equilibrium or stability
40
Q
surplus:
A
- when the quantity supplied exceeds the quantity demanded - above equilibrium
41
Q
shortage:
A
- when the quantity demanded exceeds the quantity supplied - below equilibrium
42
Q
free market system:
A
- supply and demand = free market - the producers can bring it back to equilibrium
- no gov. control means buyers and sellers take control
43
Q
double shift rule:
A
- if two curves shift at the same time, either price or quantity will be intermediate (ambiguous) price ceiling
44
Q
price controls:
A
legal restrictions on how high or low a market price may go
45
Q
price ceiling:
A
- a maximum price sellers are allowed to change for a good or service
- creates shortage
46
Q
price floor:
A
- a minimum price buyers are required to pay for a good or service
- creates surpluses
