Test 1 Chapters 1,2,3,6

Question 1

Economics

Answer 1

the study of man’s unlimited wants in a world of limited sources

Question 2

When is a good considered scarce?

Answer 2

if everybody can’t get all they want for free

Question 3

Guideposts to Economic Thinking

Answer 3

1. There’s no such thing as a free lunch.
2. People choose purposefully- therefore they econmize.
3. Information, like everything else, is a scarced good.
4. People respond to incentives
5. Remember the secondary effects
6. Value is subjective.

Question 4

absolute advantage

Answer 4

you can produce the product faster than the other guy

Question 5

comparative advantage

Answer 5

you can produce the product cheaper than the other guy

Question 6

You have the lowest opportunity cost because

Answer 6

you have the comparative advantage

Question 7

opportunity cost

Answer 7

what you have to give up in order to do something else

Question 8

the value of your second best alternative

Answer 8

absolute advantage

Question 9

economics is based on

Answer 9

supple and demand

Question 10

first law of demand

Answer 10

there is negative or inverse relationship between the price and the quantity demanded

Question 11

first law of demand- Price goes up, Quantity Demanded

Answer 11

goes down

Question 12

first law of demand - Prices goes down, Quantity Demanded

Answer 12

goes up

Question 13

there is not a good that can violate the

Answer 13

first law of demand

Question 14

the demand curve plots out

Answer 14

every possible price and quantity demanded combination and shows the maximum you are willing to pay to buy at any give quantity

Question 15

change in the quantity demanded

Answer 15

is due only to a change in the price of the product

Question 16

change in demand

Answer 16

at any give price you want to buy more or less than before

Question 17

increase in demand

Answer 17

at any give price you want to buy more than before

Question 18

decrease in demand

Answer 18

at any give price you want to buy less than you did before

Question 19

demand determinants

Answer 19

1. taste and preferences
2. cost of related goods
3. income
4. number of buyers
5. future price

Question 20

susbtitutes

Answer 20

goods that can be used in place of one another

coke - pepsi

Question 21

complimentary goods

Answer 21

goods that are used together

milk-cereal

Question 22

substitues - if the price of coke goes up what happens to Pepsi

Answer 22

its price goes up

Question 23

substitutes if the price for coke goes down what happens to pepsi

Answer 23

the price goes down

Question 24

compliments - if the price price of milk goes up what happens to cereal

Answer 24

the demand for cereal goes down

Question 25

compliments - if the price for Big Mac goes down what happens to French fries

Answer 25

the demand goes up for French fries

Question 26

income - the less you make the quality of your goods _

Answer 26

go down

Question 27

income - the more you make the the quality of your goods _

Answer 27

increase (better quality)

Question 28

future price - if you expect the price to rise in the near future you will _

Answer 28

increase your current demand (buy more)

Question 29

future price - if you expect the price to fall in the near future you will _

Answer 29

decrease your current demand (buy less until the price lowers) (upcoming sale at hobby lobby, you wait for the sale, so your current demand decrease for hobby lobby)

Question 30

price of the product will never change the

Answer 30

demand

Question 31

first law of supply

Answer 31

there is a positive or direct relationship between the price and quantity supply

Question 32

first law of supply - price goes up, quantity supply goes

Answer 32

up

Question 33

first law of supply - price goes down, quantity supply goes

Answer 33

down

Question 34

supply curve

Answer 34

plots out every possible price and quantity supplies combination and shows the minimum price you are willing to accept to supply any given quantity

Question 35

surplus

Answer 35

will exist whenever at a give price, the quantity supplied is greater than the quantity demanded

Question 36

what causes a surplus

Answer 36

the price is too high (it is above the market equilibrium price

Question 37

what cause a shortage

Answer 37

will exist whenever at a given price the quantity demanded is greater than the quantity supplied (the price is too low) (it is below the equilibrium price)

Question 38

demand goes up, price* goes up, quantity* goes

Answer 38

up

Question 39

demand goes down, price* goes down, quantity* goes

Answer 39

down

Question 40

supply goes up, price* goes down, quantity* goes

Answer 40

up

Question 41

supply goes up, price * goes up, quantity* goes

Answer 41

down

Question 42

demand goes up

Answer 42

at any given price you buy more

Question 43

demand goes down

Answer 43

at any given price you want to buy less

Question 44

supply goes up

Answer 44

at any give price you want to sell more

Question 45

supply goes down

Answer 45

at any give price you want to sell less

Question 46

price ceiling

Answer 46

the maximum you can legally charge for the product

Question 47

for ceiling price to be effective

Answer 47

it has to be set below the market equilibrium price | - it will always cause a shortage

Question 48

price floor

Answer 48

the minimum price you can legally charge for the product

Question 49

for price floor to be effective

Answer 49

it has to be set above the market equilibrium price | - it will cause a shortage

Question 50

second law of supply and demand

Answer 50

over time the supply and/or demand for a product becomes elastic

Question 51

elasticity

Answer 51

how responsive you are to a change in the price of the product

Question 52

elastic

Answer 52

you are very responsive to a change in the price of the product

Question 53

a small change in the price results in

Answer 53

large change in the quantity demanded

Question 54

inelastic

Answer 54

you are very unresponsive to a change in the price of the product

Question 55

a large change in the price results in

Answer 55

a small change in the quantity demanded

Question 56

what does a relatively elastic graph look like

Answer 56

slight slope in demand

Question 57

elasticity determinants

Answer 57

1. number of substitutes 2. percentage of income 3. necessity vs. luxury

Question 58

consumer surplus

Answer 58

the difference between the maximum you were willing today for the product and the price you actually paid for it

Question 59

producer surplus

Answer 59

the difference between the minimum price you were willing to sell the product for the price you actually sold it for

Question 60

change in the quantity supplied is a change in the

Answer 60

supply

Question 61

change in the quantity supplied is due only to a change in the

Answer 61

price of the product

Question 62

at any given price you want to supply more or less than before

Answer 62

Change in supply

Question 63

supply determinants

Answer 63

``` taxes and subsidies number of sellers costs of input technology nature ```

Question 64

at any given price you want to supply more than before (curve shifts right)

Answer 64

increase in supply

Question 65

at any given price you want to supply less than before (curve shifts left)

Answer 65

decrease in supply