The Basics

Question 1

Economics

Answer 1

the study of how humans make choices under conditions of scarcity

Question 2

Macro-Economics

Answer 2

the branch of economics that focuses on broad issues such as growth, unemployment, inflation, and trade balance

Question 3

Micro-Economics

Answer 3

the branch of economics that focuses on actions of particular agents within the economy, like households, workers, and business firms

Question 4

Market

Answer 4

interaction between potential buyers and sellers; a combination of demand and supply

Question 5

Scarcity

Answer 5

when human wants for goods and services exceed the available supply

Question 6

Demand

Answer 6

the relationship between price and the quantity demanded of a certain good or service

Question 7

Supply

Answer 7

the relationship between price and the quantity supplied of a certain good or service

Question 8

Demand Curve

Answer 8

a graphic representation of the relationship between price and quantity demanded of a certain good or service, with quantity on the horizontal axis and the price on the vertical axis

Question 9

Supply Curve

Answer 9

a line that shows the relationship between price and quantity supplied on a graph, with quantity supplied on the horizontal axis and price on the vertical axis

Question 10

Opportunity Cost

Answer 10

measures cost by what we give up/forfeit in exchange; opportunity cost measures the value of the forgone alternative

Question 11

Equilibrium

Answer 11

the situation where quantity demanded is equal to the quantity supplied; the combination of price and quantity where there is no economic pressure from surpluses or shortages that would cause price or quantity to change

Question 12

Equilibrium Price

Answer 12

the price where quantity demanded is equal to quantity supplied

Question 13

Equilibrium Quantity

Answer 13

the quantity at which quantity demanded and quantity supplied are equal for a certain price level

Question 14

Law of Demand

Answer 14

the common relationship that a higher price leads to a lower quantity demanded of a certain good or service and a lower price leads to a higher quantity demanded, while all other variables are held constant

Question 15

Law of Supply

Answer 15

the common relationship that a higher price leads to a greater quantity supplied and a lower price leads to a lower quantity supplied, while all other variables are held constant

Question 16

Price

Answer 16

what a buyer pays for a unit of the specific good or service

Question 17

Price Ceiling

Answer 17

a legal maximum price

Question 18

Surplus

Answer 18

at the existing price, quantity supplied exceeds the quantity demanded; also called excess supply

Question 19

Elastic

Answer 19

a small change in price leads to a large change in quantity demanded or supplied. Example: Luxury Goods

Question 20

In-Elastic

Answer 20

a change in price has little to no effect on quantity demanded or supplied. Example: Essential goods like medicine or gasoline.

Question 21

Elastic Demand

Answer 21

when the elasticity of demand is greater than one, indicating a high responsiveness of quantity demanded or supplied to changes in price

Question 22

Elastic Supply

Answer 22

when the elasticity of either supply is greater than one, indicating a high responsiveness of quantity demanded or supplied to changes in price

Question 23

Elasticity

Answer 23

an economics concept that measures responsiveness of one variable to changes in another variable

Question 24

Money

Answer 24

whatever serves society in four functions: as a medium of exchange, a store of value, a unit of account, and a standard of deferred payment.

Question 25

Asset

Answer 25

item of value that a firm or an individual owns

Question 26

Balance Sheet

Answer 26

an accounting tool that lists assets and liabilities

Question 27

Credit Card

Answer 27

immediately transfers money from the credit card company’s checking account to the seller, and at the end of the month the user owes the money to the credit card company; a credit card is a short-term loan

Question 28

Debit Card

Answer 28

like a check, is an instruction to the user’s bank to transfer money directly and immediately from your bank account to the seller

Question 29

Liability

Answer 29

any amount or debt that a firm or an individual owes

Question 30

Net Worth

Answer 30

the excess of the asset value over and above the amount of the liability; total assets minus total liabilities