Chapter 1 Terms

Question 1

Economics

Answer 1

• The study of the choices that individuals and societies make in the production, distribution, and consumption of goods

Question 2

Economy

Answer 2

• Any system for the production, distribution, and consumption of goods

Question 3

Economists

Answer 3

• Scholars of the production, distribution, and consumption of goods within an economy

Question 4

Macroeconomics

Answer 4

• The study of national and international economies and how these major economies are affected by large-scale choices and public policies

Question 5

Microeconomics

Answer 5

• The study of specific components within a major economy and how the choices made by individuals, households, and businesses affect that economy

Question 6

Economic Models

Answer 6

• Seek to show the relationships among the various components of an economy

Question 7

Economic Forecast

Answer 7

• Seeks to help those making decisions to make wise decisions

Question 8

Good

Answer 8

• A tangible item that people want and for which they will pay

Question 9

Services

Answer 9

• Intangible goods produced by labor for which people expect to pay

Question 10

Want

Answer 10

• The human desire to have and use a certain good

Question 11

Market

Answer 11

• A mechanism that allows people to exchange goods

Question 12

Mass Market

Answer 12

• A very large number of people to whom very large quantities of products are sold

Question 13

Supply

Answer 13

• The quantity of a good for sale at a certain price under certain conditions
• The amount of a good that is produced

Question 14

Demand

Answer 14

• The amount of a good that is bought at a certain price under certain conditions

Question 15

What is the first thing to understand about economics?

Answer 15

• All goods have to be worked for

Question 16

Producers

Answer 16

• Provide goods

Question 17

Consumers

Answer 17

• Use goods

Question 18

Prodigality

Answer 18

• The bad habit of spending more than one can afford

Question 19

Need

Answer 19

• A necessity

Question 20

Want

Answer 20

• A desire, a longing, an appetite for something

Question 21

Capital Good, Investment Good, or Capital

Answer 21

• Anything used in the production and distribution of goods and services

Question 22

Consumer Goods

Answer 22

• Things produced for direct use by consumers

Question 23

Technology

Answer 23

• The industrial skills and scientific methods that make possible efficient production

Question 24

Utility

Answer 24

• Usefulness

Question 25

Scarcity

Answer 25

• Limited availability

Question 26

Who was the founder of the Austrian School of Economics who also came up with the solution to the Diamond-Water Paradox?

Answer 26

• Carl Menger

Question 27

Diamond-Water Paradox

Answer 27

• Asked why rare items such as diamonds normally command high prices while necessities such as water usually command low prices

Question 28

Value

Answer 28

• The worth that consumers attach to a good

Question 29

Is money considered to be capital?

Answer 29

• No