Exam One

Question 1

simplified representation of the real world, shows how the economy works

Answer 1

model

Question 2

theory not opinion

Answer 2

models are based in

Question 3

other things equal/other facts are constant, holding other relevant factors constant/equal

Answer 3

ceteris paribus

Question 4

theories and predictions hold

Answer 4

as long as assumptions hold

Question 5

statistical analysis

Answer 5

how assumptions are tested

Question 6

two goods case, shows options available for production of these two goods in different quantities

Answer 6

production possibilities model

Question 7

given things in PPF

Answer 7

resources and technology

Question 8

why PPF is concave

Answer 8

opportunity cost is not constant

Question 9

endpoint of PPF

Answer 9

all resources are going to one production type

Question 10

production efficiency and allocative efficiency, there is no way to make people better without others being worse, no missed opportunities

Answer 10

economic efficiency

Question 11

combination along PPF line that is the best

Answer 11

production efficiency

Question 12

picking the best combination for maximum satisfaction

Answer 12

allocative efficiency

Question 13

who has the lower opportunity cost of production, could be different for each type of good, determines what people should trade and specialize in

Answer 13

comparative advantage

Question 14

smaller trade off

Answer 14

best use of resources

Question 15

direct exchange of goods and services

Answer 15

barter

Question 16

not producing everything you consume

Answer 16

not self-sufficient

Question 17

exchanges of resources, goods, and services, do it for the benefit of both parties, voluntary exchanges

Answer 17

trade

Question 18

overall increased production of goods and services, more consumption possible

Answer 18

mutual gains

Question 19

more consumption possible, increased satisfaction of wants, increased variety, lower prices for consumers

Answer 19

benefits of mutual gains

Question 20

each concentrates on the tasks they are relatively better at, based on comparative advantage

Answer 20

specialization

Question 21

output/labor

Answer 21

labor productivity

Question 22

relative prices of traded goods, what people really gain in trade

Answer 22

terms of trade

Question 23

when the terms of trade are greater than the opportunity cost

Answer 23

international trade continues

Question 24

when the terms of trade are less than the opportunity cost

Answer 24

countries just produce their own goods

Question 25

eliminating and restricting free trade

Answer 25

everyone goes down in satisfaction

Question 26

ability to produce a good more efficiently than others, more output of a good per worker

Answer 26

absolute advantage

Question 27

economics with judgement, not empirical, values a person has, can have disagreement about goals, based on ethical standards or norms, not testable

Answer 27

normative economics

Question 28

economics with factual, empirical evidence, accepted relationships between variables, neither right or wrong, one correct answer, basis of economic analysis, testable

Answer 28

positive economics

Question 29

representation of market system, flows of money, goods, and services, how they are channeled through the economy

Answer 29

circular flow diagram

Question 30

households in circular flow diagram

Answer 30

act as consumers but also allocate resources

Question 31

firms in circular flow diagram

Answer 31

provide goods and services, buy resources

Question 32

price times quantity sold

Answer 32

income

Question 33

mutual gains that individuals can achieve by specializing in doing different things and trading with one another

Answer 33

gains from trade

Question 34

goods, services, labor, raw materials in circular flow diagram

Answer 34

flow of physical things

Question 35

consumer spending, income, revenue, costs in circular flow diagram

Answer 35

flow of money

Question 36

firms sell what they produce to households in circular flow diagram

Answer 36

markets for goods and services

Question 37

firms buy resources they need to produce goods and services in circular flow diagram

Answer 37

factor markets

Question 38

how the total income created in an economy is allocated between less skilled workers, highly skilled workers, and owners of land and capital

Answer 38

income distribution

Question 39

description economy

Answer 39

positive economy

Question 40

prescription economy

Answer 40

normative economy

Question 41

simple prediction of the future

Answer 41

forecast

Question 42

market that has many buyers and sellers of the same good, none can influence the price of the good

Answer 42

competitive market

Question 43

model of how a competitive market behaves

Answer 43

supply and demand model

Question 44

table showing how much of a good or service consumers will want to buy at different prices

Answer 44

demand schedule

Question 45

actual amount of a good or service consumers are willing to buy at some specific price

Answer 45

quantity demanded

Question 46

graphical representation of the demand schedule, shows relationship between quantity demanded and price

Answer 46

demand curve

Question 47

a higher price for a good or service leads people to demand a smaller quantity of that good or service

Answer 47

law of demand

Question 48

change in quantity demanded at any given price, denoted by a new demand curve

Answer 48

shift of the demand curve

Question 49

change in the quantity demanded of a good's arising from a change in the good's price

Answer 49

movement along the demand curve

Question 50

increase in demand

Answer 50

rightward shift, consumers demand larger quantity

Question 51

decrease in demand

Answer 51

leftward shift, consumers demand smaller quantity

Question 52

if a rise in the price of a good leads to an increase in the demand for another good

Answer 52

substitutes

Question 53

if a rise in the price of a good leads to a decrease in the demand for another good, usually consumed together

Answer 53

complements

Question 54

a good whose demand increases when consumer income rises

Answer 54

normal goods

Question 55

a good whose demand decreases when consumer income rises

Answer 55

inferior good

Question 56

relationship between quantity demanded and price for an individual consumer

Answer 56

individual demand curve

Question 57

behavior of buyers

Answer 57

demand

Question 58

what does demand show

Answer 58

quantities of goods consumers would be willing to buy at certain prices

Question 59

what stays the same for demand

Answer 59

time period, quality

Question 60

wanting to buy something is determined by your

Answer 60

willingness and ability

Question 61

what does the change in the price of a good do to demand

Answer 61

nothing

Question 62

sum of all the possible prices of an item, amount consumers would purchase at a specific price

Answer 62

quantity demanded

Question 63

what is needed in order to find the quantity demanded

Answer 63

price of the good

Question 64

shows direction of changes that are occuring

Answer 64

law of demand

Question 65

what happens when the price goes up in the law of demand

Answer 65

quantity demanded goes down

Question 66

what happens when the price goes down in the law of demand

Answer 66

quantity demanded goes up

Question 67

demand factor, influences ability to purchase goods at the same price

Answer 67

change in income

Question 68

demand factor, influences willingness to buy, can cause demand to go up or down

Answer 68

change in tastes/preferences

Question 69

demand factor, one good's value affects another good's value

Answer 69

change in prices of related goods

Question 70

demand factor, when the amount of people changes

Answer 70

change in the number of consumers

Question 71

demand factor, prediction about what may happen

Answer 71

change in expectations about future income and prices

Question 72

demand curve when demand goes up

Answer 72

shifts to the right

Question 73

demand curve when demand goes down

Answer 73

shifts to the left

Question 74

what is quantity demanded a function of

Answer 74

price

Question 75

what type of consumer is demand referencing to

Answer 75

households