Chapter 1

Question 1

Economics is concerned with

Answer 1

Efficient use of scarce resources to obtain the maximum satisfaction of societies unlimited wants

Question 2

scarcity

Answer 2

restricts options and requires choices

Question 3

opportunity cost

Answer 3

what is forgone for that choice

Question 4

scarce resources 6

Answer 4

land
labour
- human capital
-capital
- investment
- entrepreneural ability

Question 5

purposeful behaviour

Answer 5

people pursue oppportunities in order to increase their utility
- people make decisions with desired outcome in mind
- RATIONAL

Question 6

marginal analysis

Answer 6

comparing costs and benefits

Question 7

the individual 4

Answer 7

1. facing trade-offs (must make best decisions)
2. opportuninty costs
3. choosing a little more or a little less (marginal analysis)
4. influcence of incentives (taking BA OR MA)

Question 8

interaction among individuals

Answer 8

5. specialization and trade (make both countries best at what they’re producing)
6. the effectiveness of markets (coordinating trade)
7. role of govnt` (make sure competition is avaliable)

Question 9

the economy as a whole

Answer 9

8 production and the standard of living (more produced better life)
9. money and inflation (income can imporve life)
10. inflation- unemployment trade off (one goes up other goes down)

Question 10

scientific method

Answer 10

observe, formulate hypothesis, test, accept/reject, continue to test hypothesis

Question 11

capital

Answer 11

NoT money, physical capital\
- tools, machines, factories

Question 12

entreprenuers

Answer 12

takes incentive, business decisions, innovates, RISK taker

Question 13

margin

Answer 13

extra

Question 14

micro econ

Answer 14

concerned with individual units such as industries firms and households
- worms eye view

Question 15

macro econ

Answer 15

concerned with economy as a whole
-birds eye view

Question 16

positive economics

Answer 16

analysis of facts to establish cause and effect relationships (WHAT IS)
- it IS 25 degrees

Question 17

normative econ

Answer 17

deals with judgements of what economy should be (WHAT OUGHT TO BE)
- it SHOULD be 25 out

Question 18

entrepreneurs economic functions

Answer 18

• takes initiative
• makes business decisions
• innovates
• bears risk

Question 19

production possibilities model

Answer 19

illustrates production choices

Question 20

production possibilities model assumptions

Answer 20

• full employment (all avaliable resouces being used)
• fixed resources
• fixed technology
• two goods (consumer and capital- tools)

Question 21

what law makes production possibilities curve concave

Answer 21

law of increasing opportunity

Question 22

unemployment

Answer 22

• economy may not be operating at full employment
• points INSIDE of production possibility cueve

Question 23

inside the PPC is what

Answer 23

unemployment or failure to achieve production efficienty

Question 24

what is a right shoft in PPC mean

Answer 24

economic growth. more resources, land, capital, more workers

Question 25

a growing economy has

Answer 25

- increas ein factor supplies - imporoved factor quality - tech advances

Question 26

pitfalls to economic reasoning

Answer 26

- biases (personal opinion) - loaded termonology (confuses concept) - fallacy of composition (whats good for one is not good for all) - post hoc fallacy (we assume an event caused another event... wearing lucky socks) - correlation and causation ( what is cause is effect. people with education have high wages)

Question 27

present and future choices

Answer 27

- save now for a better future - present economic growth is focused on demand rather than saving for future - overtime if saving, graph will grow outwards

Question 28

rational self-interest

Answer 28

- not thte same as selfishness - charities

Question 28

rational self-interest

Answer 28

- not thte same as selfishness - charities

Question 29

economic principal

Answer 29

statement about economic behaviour or the economy that enables predication of the profitbale effects of vertain actions. combos of principals are incorporated into models Predicting profit on certain economic moves.

Question 30

things to know about economic principals

Answer 30

- generalizations (typical or average consumers) - other things equal assumption - expressed graphically

Question 31

budget line

Answer 31

figuring out a econ prob by comparing 2 products consumers can purchase at a specified income - varies with income

Question 32

land

Answer 32

includes all natural resources used in production process

Question 33

consumer goods vs capital goods

Answer 33

consumer satisfy wants directly, capital do so indirectly, production

Question 34

PPC cueve demonstrates what

Answer 34

- different combos of goods and services that society can potentially produce in a full employed econ