Chapter 1

Question 1

Economics

Answer 1

Study of choices consumers businesses and government officials make to attain their goals given scarce resources

Question 2

Three important economic ideas

Answer 2

1. ) people are rational
2. ) people respond to incentives ( banks don’t hire Sercurity due to low robberies low incentives )
3. ) people make optimal decisions at margin ( consider cost to benefit analysis )

Question 3

Three fundamental questions of economics

Answer 3

1. ) what goods and services will be produced
2. ) how Willl the goods and serviced be produced
3. ) who will receive the goofs and serviced produced

Question 4

Economic model

Answer 4

Simplified version of reality used to analyze real world economic situations

Question 5

Market

Answer 5

A group of buyers and sellers of a good or service and the institution or arrangement by which they come together to trade.

Question 6

Scarcity

Answer 6

Unlimited wants exceed limited resources

Question 7

Marginal analysis

Answer 7

The analysis that involves comparing marginal benefit to marginal cost

Question 8

Trade off

Answer 8

The idea because scarcity , producing more of one good or service mean of production less of another

Question 9

Opportunity cost

Answer 9

The highest value alternative that must be given up to engage in an activity

Question 10

Centrally planned economy

Answer 10

An economy in which the government decided she how economic resources will allocate.

Question 11

Market economy

Answer 11

An economy in which the decisions of households and firms interact with the market Adam allocate economic resources

Question 12

Productivity efficiency

Answer 12

Occurs when good or service is produced at the lowest price possible

Question 13

Allocative efficiency

Answer 13

Occurs when production is in a accordance with consumer preferences .

Question 14

Voluntary exchange

Answer 14

A situation in market when both buyer and seller of a product are made better off by transaction

Question 15

Equity

Answer 15

The distribution of economic benefits

Question 16

Economic variables

Answer 16

Something measurable that can have different values such as wages or software programming

Question 17

Positive analysis

Answer 17

Analysis concerned with what is

Fact

Question 18

Normative analysis

Answer 18

Analysis concerned with what ought to be

Opinion

Question 19

Microeconomics

Answer 19

Study of how households firms make choices and interact with markets , how government attempts to influence the, how they resond

Question 20

Macroeconomics

Answer 20

Study of the economy as a whole including topics as inflation so unemploymerm , explains why economics experiences recessions

Question 21

Innovation

Answer 21

The practical application of an invention or improvement

Question 22

Technology

Answer 22

Firms use this to make good and services

Question 23

Firm ,company, business

Answer 23

Organization that produces goods or services

Question 24

Goods

Answer 24

Tangible merchandise

Question 25

Services

Answer 25

Activities down for other

Question 26

Profits

Answer 26

Difference between revenue and cost P= R -C

Question 27

Factors of production / economic resources

Answer 27

Used to produce goods

Question 28

Human capital

Answer 28

Trading skills workers have

Question 29

Mixed economy

Answer 29

Economy where decisions result from interactions of buyers and sellers in market but which government plays a role in allocated resources.

Question 30

Formula for developing an economic model

Answer 30

1. ) assumption 2. ) form testable hypothesis 3. ) use dare to test 4. ) revise 5. ) retain