CoreMicroEconomics_CH_1

Question 1

What is GDP?

Answer 1

Gross Domestic Product - Represents all the goods and services produced annually

Question 2

What is microeconomics?

Answer 2

The decision making by individuals, businesses, industries, and governments

Question 3

What is macroeconomics?

Answer 3

The broader issues in the economy such as inflation, unemployment, and national output of goods and services

Question 4

Explain the scope of economics and economic analysis?

Answer 4

Economic analysis can be usually applied to topics as diverse as how businesses make decisions, how college students allocate their time between studying and relaxing, etc. While economics is separated into two broad categories

Question 5

What is ceteris paribus?

Answer 5

Assumption used in economics, where other relevant factors or variables are held constant/equal

(For example, holding monthly income constant but changing the price of a product); economics creates simple models that hold all other relevant factors constant

Question 6

What is efficiency?

Answer 6

How well resources are used and allocated.

Do people get the goods and services they want at the lowest possible resource cost? This is the chief focus of efficiency

Question 7

What is production efficiency?

Answer 7

Occurs when goods are produced at the lowest possible cost

Question 8

What is allocative efficiency?

Answer 8

Occurs when individuals who desire a product the most get those goods and services (and is measured by their willingness to pay)

Question 9

What is equity?

Answer 9

The fairness of various issues and policies

(defined: the quality of being fair and impartial)

(when just a few people earn nearly all of the income and control nearly all of societies wealth, most people agree that this is unfair)

Question 10

What is scarcity?

Answer 10

Our unlimited wants clash with limited resources, leading to scarcity

(rich and poor) because, at a minimum, our time is limited on earth. Economics focuses on the allocation of scarce resources to satisfy unlimited wants

Question 11

What is opportunity costs?

Answer 11

What you give up to do something or purchase something.

(for example, to watch a movie at a theater, there is not just the monetary cost of the tickets, but the time involved in watching the movie) You could have been doing something else

Question 12

What are the key ideas of economics?

Answer 12

Choice and scarcity force tradeoffs

Question 13

What is the cost of life?

Answer 13

‘Opportunity Costs’ dominate our lives (everything we do involves opportunity costs)

Question 14

What is rational thinking in economics?

Answer 14

Rational behavior requires thinking at the margin. (thinking about how things will be effected on the curve of things)

Question 15

People follow ____________.

Answer 15

Incentives

Question 16

Why are ‘markets efficient’?

Answer 16

Markets increase competition which helps lower prices.

increases competition help lower prices

Question 17

Government must deal with market failure (like pollution)

Answer 17

.

Question 18

Information is important

Answer 18

.

Question 19

Specialization and trade improve what?

Answer 19

Our Lives(you/I), and our standard of living.

Question 20

___________ determines our standard of living

Answer 20

Productivity

Question 21

Government can smooth the fluctuation in the overall economy

Answer 21

.

Question 22

What are the four simple forms of data graphs?

Answer 22

Time series, scatter plots, pie charts, and bar charts

Question 23

What is a time series data graph?

Answer 23

Involve plotting time on the horizontal axis and the value of some variable on the vertical axis *

Question 24

What is a scatter plot data graph?

Answer 24

Graphs where two variable (neither variable is time) are plotted against each other *

Question 25

What is a pie chart data graph?

Answer 25

Show date that can be split into percentage parts that combined make up the whole *

Question 26

What is a bar chart?

Answer 26

Use bars to show the value of specific data points *

Question 27

What is a linear relationship?

Answer 27

The curve is a straight line (ex. for every hour studied, GPA increases by .1) *

Question 28

How to compute the slope of a linear line?

Answer 28

Slope = rise/run *

Question 29

What is a nonlinear relationship?

Answer 29

More realistic than linear, there is a curve in the graph (ex. First, hours of studying results in greater improvements to GPAs than further studying hours; exhibits what experts call diminishing returns)*

Question 30

How to compute the slope of a nonlinear curve?

Answer 30

Computing the slope at point a requires drawing a line tangent to that point then compute the slope for that line *

Question 31

What is a simple linear equation?

Answer 31

Y=a+b*X where Y is the variable plotted on the y axis and a is a constant (the vertical intercept so when X is zero) and b is a different constant multiplied by X, the value on the x axis (ex. using average study hours per week to figure out GPA, .1 increase of GPA per hour starting with a GPA of 1.0, looks like GPA=1.0+.1*Hour per week) *

Question 32

Explain why correlation is not the same as causation?

Answer 32

The relationship between two events that are occurring at the same time is ambiguous. The fact that they are happening together (correlation) does not mean that one caused the other (causation)

Question 33

What is real GDP?

Answer 33

Real Gross Domestic Product is a macroeconomic measure of the value of economic output adjusted for price changes. This adjustment transforms the money-value measure, nominal GDP, into an index for quantity of total output.

Question 33

Adam Smith

Answer 33

Wrote: The Wealth Of The Nations" * Invisible Hand (“By directing that industry in such a manner as its produce may be of the greatest value) * “father of political economy” * People seem to support or oppose him.