M1 - Definitions

Question 1

Economics

Answer 1

Social science that sties the production, distribution and consumption of goods and services

Question 2

Microeconomics

Answer 2

Deals with the behavior of decision makers and the operation of specific product, labor and capital markets (small scale)

Question 3

Resource

Answer 3

Anything that can be used to produce something else or be directly consumed

Question 4

Cost-benefit rule

Answer 4

Take action if and only if its benefit is at least as large of its cost

Question 5

Opportunity cost

Answer 5

The value of the opportunities forgone by taking a specific action

Question 6

Explicit cost

Answer 6

Involve an outlay of money

Question 7

Implicit cost

Answer 7

Do not involve an outlay of money but do involve a forgone benefit

Question 8

True cost

Answer 8

The value of what you must give up to obtain a good (incl. opp costs)

Question 9

Marginal decision

Answer 9

A choice about a little more or less of something. Incremental benefit of cost of one more unit of the activity

Question 10

Trade-off

Answer 10

Comparison of costs and benefits

Question 11

Incentive

Answer 11

Opportunities to make oneself better off. Something that motivates a person to take or not take an action

Question 12

Command economy

Answer 12

Decisions about the production, delivery and selling of goods is made by the government

Question 13

Invisible Hand

Answer 13

The idea that the market economy manages itself without anyone’s interference

Question 14

Market failure

Answer 14

When the individual pursuit their own interests instead of society’s

Question 15

Recessions

Answer 15

Downturns in the economy

Question 16

Economic growth

Answer 16

The increasing ability of the economy to produce goods and services, leading to higher living standards

Question 17

Economic interactions

Answer 17

How one’s choices affect others

Question 18

Economic models

Answer 18

Simplifications of reality that capture the essence of the represented phenomenon

Question 19

Other things equal Assumption

Answer 19

Assuming that other relevant factors within a model stay the same

Question 20

Production Possibilities Frontier

Answer 20

A graphical model that shows that combinations of outputs an economy can produce at a particular point in time given its productive resources and technologies

Question 21

Productive potential

Answer 21

The maximum amount of goods and services that an economy can produce

Question 22

Gains from trade

Answer 22

The mutual gains that individuals can achieve by specializing in doing different things and then trading

Question 23

Absolute advantage

Answer 23

When one producer uses fewer productive resources to produce a good or service than some other person

Question 24

Comparative advantage

Answer 24

When one producer can produce that good at a lower opportunity cost than some other person

Question 25

Efficiency in production

Answer 25

No missed opportunities in production

Question 26

Efficiency in allocation

Answer 26

Economies being able to allocate their resources to ensure the wellness of their consumers

Question 27

Per capita income

Answer 27

The total income of the country divided by the size of the population

Question 28

Time-series graph

Answer 28

Use to see what happens with economic variables over time. Dates in x axis and values of a variable on y axis

Question 29

Market

Answer 29

A group of producers and consumers who exchange goods and services for payment

Question 30

Competitive market

Answer 30

A market that has multiple independent buyers/sellers, cannot be influenced b a single person and the traded goods are standardized

Question 31

Standardized goods

Answer 31

Every unit being traded is the same (ex, quality is not a concern)

Question 32

Quantity demanded

Answer 32

The amount consumers are willing and able to spend on a purchase during a specific time

Question 33

Law of Demand

Answer 33

Higher prices for a good, other things equal, lead to people demanding less of that good

Question 34

Demand schedule / curve

Answer 34

Graphical representations of how much of a good or service consumers will want to buy at different prices

Question 35

Normal goods

Answer 35

When income raises, so does demand for these goods

Question 36

Inferior goods

Answer 36

When income raises, demand for these goods drops

Question 37

Quantity supplied

Answer 37

The quantity that producers of any good or service are willing and able to produce (and offer for sale) during a specific period of time

Question 38

Supply schedule / curve

Answer 38

A graphical representation showing how much of a good or service producers will supply at different prices

Question 39

Market Equilibrum

Answer 39

A situation in which no individual would be better off by taking a different action (price has moved to a level where quantity of demand equals quantity of demand)

Question 40

Equilibrium Price / market-clearing price

Answer 40

The price that matches the quantity supplied and demanded

Question 41

Equilibrium quantity

Answer 41

The quantity bought and sold at equilibrium price

Question 42

Surplus

Answer 42

Excess

Question 43

Shortage

Answer 43

Lack of

Question 44

Simultaneous Shifts

Answer 44

when both the eq price and eq quantity move at the same time, given a multitude of factors

Question 45

Qualitative forecast

Answer 45

Involves predicting the direction of a change in an economic variable

Question 46

Quantitative forecast

Answer 46

Involves predicting the direction AND MAGNITUDE of a change in an economic variable

Question 47

Positive Economics

Answer 47

Answer questions about how the world works with definitive right/wrong answers. Descriptive

Question 48

Normative economics

Answer 48

Analysis about how the world SHOULD work Prescription

Question 49

Choke price

Answer 49

The lowest price at which the quantity demanded falls to 0

Question 50

Input

Answer 50

Any good or service that is used to produce another good or service.

Question 51

Subsidized

Answer 51

supported financially having part of the cost of production paid in order to keep the selling price low.