Economics Vocab Quiz 1

Question 1

Principle 1: People face tradeoffs

Answer 1

To get one thing, we usually have to give up another

Ex: guns vs. butter

Question 2

Efficiency

Answer 2

society gets the most that it can from its scarce resources

“How big is the pie”

Question 3

Equity

Answer 3

The benefits of resources are distributed fairly among the members of society

“How the pie should be cut”

Question 4

Principle 2: The cost of something is what you give up to get it

Answer 4

Decisions require comparing costs and benefits of alternatives

Question 5

Cost

Answer 5

What you give up to get something

Question 6

Oppurtunity cost

Answer 6

What you give up to obtain an item

Singular

Question 7

Marginal changes

Answer 7

Small, incremental adjustments to an existing plan of action

Question 8

Market economy

Answer 8

An economy that allocates resources through the decentralized decision of many firms and households as they interact in markets for goods and services

Question 9

Households

Answer 9

decide what to buy and who to work for

Question 10

Firms

Answer 10

decide who to hire and what to produce

Question 11

Invisible hand

Answer 11

Adam Smith’s idea that when economies are left alone prices tend to guide trends to maximize welfare

Question 12

Market failure

Answer 12

Occurs when the market fails to allocate resources efficiently

Question 13

Externality

Answer 13

Impact of one person or firm’s actions on the well-being of a bystander

Question 14

Market power

Answer 14

Ability of a single person or firm to unduly influence market prices

Question 15

Productivity

Answer 15

Amount of goods and services produced from each hour of a worker’s time

Question 16

Inflation

Answer 16

Increase in the overall level of prices in the economy

Question 17

Phillips Curve

Answer 17

Illustrates the tradeoff between inflation and unemployment

Question 18

Need

Answer 18

basic requirement for survival

Ex: food, clothing, shelter

Question 19

Want

Answer 19

Means of expressing a need

Question 20

Free products

Answer 20

Sunshine or air

Plentiful and no one could own them and no price could be placed on them

Question 21

Economic products

Answer 21

Goods and services that are useful, relatively scarce and transferable to other

Question 22

Goods

Answer 22

Tangible commodity

Question 23

Consumer good

Answer 23

Intended for final use by individuals

Question 24

Capital good

Answer 24

Manufactured good used to produce other goods and services

Question 25

Durable good

Answer 25

Any good that lasts longer than 3 years

Question 26

Nondurable good

Answer 26

an item that lasts for less than 3 years Ex: food, clothing, paper

Question 27

Service

Answer 27

Work that is performed for someone Nontangible Ex: haircuts, home repairs

Question 28

Consumers

Answer 28

people who use goods and services to satisfy wants and needs

Question 29

Consumption

Answer 29

the process of using up goods and services in order to satisfy wants and needs

Question 30

Conspicuous consumption

Answer 30

the use of a good or service to impress others Ex: expensive cars, jewerly, shoes

Question 31

Value

Answer 31

refers to something that has a worth that can be expressed in dollars

Question 32

Utlity

Answer 32

The capacity of something to be useful to someone Varies from person to person, no set value

Question 33

Wealth

Answer 33

the sum of those economic products that are tangible, scarce, useful, and transferable from one person to another

Question 34

Marginal utlity

Answer 34

is the additional satisfaction a consumer gains from consuming one more unit of a good or service

Question 35

Production

Answer 35

process of creating goods and services

Question 36

Productivity

Answer 36

the efficient use of productive resources

Question 37

Specilization of labor

Answer 37

productive imputs do whatever task that are able to do best division of labor

Question 38

Market

Answer 38

location or other mechanism that allows buyers and sellers to deal readily in a certain economic product

Question 39

Circular flow

Answer 39

individuals earn their incomes in factor markets

Question 40

Factor markets

Answer 40

the markets where productive resources are bought and sold

Question 41

Scarcity

Answer 41

the condition that arises because society does not have enough resources to produce all the things people would like to have

Question 42

Factors of Production (inputs)

Answer 42

Land Capital Labor

Question 43

Land

Answer 43

refers to the "gifts of nature" Natural resources that are not created by human effort

Question 44

Capital

Answer 44

the tools, equipment, and factories used in the production of goods and services

Question 45

Labor

Answer 45

people with all their efforts, abilities, and skills Does not include entrepreneurs