Terms

Question 1

Economics

Answer 1

The scientific study of how a society maximizes its utility (happiness) given its scarce resources and unlimited wants

Question 2

Macroeconomics

Answer 2

The study of the regular ups and downs of the economy

Question 3

Microeconomics

Answer 3

The study of the decisions made by individuals and how it effects the economy

Question 4

Economic Good

Answer 4

a commodity, which people want and is scarce

Question 5

Free Good

Answer 5

any good, which is not scarce

Question 6

Economic Bad

Answer 6

Any item that a consumer pays to have less of

Question 7

Positive Economics

Answer 7

A statement of facts

Question 8

Negative Economics

Answer 8

A statement of opinion

Question 9

Labor

Answer 9

The mental and physical talents of people

Question 10

Capital

Answer 10

all manufactured products used to produce

Question 11

Production Possibilities Curve

Answer 11

A graph that shows the various combination of two goods with a society’s resources

Question 12

Absolute Advantage

Answer 12

When a country can produce more of a good than another country using the same resources

Question 13

Comparative Advantage

Answer 13

When a country has a lower opportunity cost of producing a good than another country

Question 14

Opportunity Cost

Answer 14

The value of the next best alternative that is given up when a choice is made

Question 15

Market

Answer 15

An institution that enables buyers and sellers to interact and transact with one another

Question 16

Willingness-to-pay

Answer 16

An individual’s valuation of a good or service, equal to the most an individual is willing and able to pay

Question 16

The Law of Demand

Answer 16

When prices rise, demand decreases

Question 16

Substitution effect

Answer 16

As prices fall, consumers will buy more of this good in place of an alternative goods relatively more expensive

Question 17

Income Effect

Answer 17

As prices of goods fall, less money is spent on that good, which frees up money that can be used to buy all goods, including the good that has fallen in price

Question 17

Demand

Answer 17

The maximum amount of the product that buyers are willing to and able to purchase over some period of time

Question 17

Demand Schedule

Answer 17

Table that shows the quantity of goods consumers are willing and able to purchase at each price

Question 17

Normal Good

Answer 17

A good for which an increase in income results in increasing demand

Question 17

Inferior Good

Answer 17

A good for which an increase in income results in decreasing demand

Question 18

Substitutes

Answer 18

Good consumers will substitute with another when the price of one good rises

Question 19

Complement

Answer 19

Goods that are usually consumed together

Question 20

Change in demand

Answer 20

occurs when one or more of the determinants of demand changes (shift of entire demand curve)

Question 21

Change in quantity demanded

Answer 21

Occurs when the price of a good changes (movement within demand curve)

Question 22

Supply

Answer 22

The maximum amount of a product that sellers are willing and able to provide for sale at various prices

Question 23

Law of Supply

Answer 23

As prices increase, quantity supplied increases (vice versa)

Question 24

Say's Law

Answer 24

Supply creates its own demand

Question 25

Change in supply

Answer 25

Occurs when one or more of the determinants of supply changes

Question 26

Changes in quantity demanded

Answer 26

Occurs when the price of the product changes

Question 27

Equilibrium

Answer 27

When quantity demanded by consumers equal the quantities supplied by suppliers (market is at balance)

Question 28

Surplus

Answer 28

When quantity supplied exceeds quantity demanded

Question 29

Shortage

Answer 29

When quantity demanded exceeds quantity supplied

Question 30

Price Ceiling

Answer 30

A maximum price set by the government for a product or service