Unit 1 (Ch. 1, 2, 5)

Question 1

Economics

Answer 1

Study of how people and society deal with scarcity and choices

Question 2

Microeconomics

Answer 2

Study of small economic units, such as individuals, firms, and industries

Question 3

Macroeconomics

Answer 3

Study of large economics as a whole or economic aggregates

Question 4

Theoretical economics

Answer 4

Scientific method used to make generalizations and abstractions to develop theories. Based on fact

Question 5

Policy Economics

Answer 5

Theories applied to fix problems or meet economic goals. Based on fact

Question 6

Positive Economics

Answer 6

Based on facts, avoids value judgements (what is)

Question 7

Normative Economics

Answer 7

Includes value judgements (what is should be)

Question 8

1 Key Assumption

Answer 8

Society’s wants are unlimited, but all resources are limited (scarcity)

Question 9

2 Key Assumption

Answer 9

Due to scarcity choices are made. Each choice has a cost (trade off)

Question 10

3 Key Assumption

Answer 10

Everyone’s goal is to make choices to maximize satisfaction. Everyone acts in their own self-interest.

Question 11

4 Key Assumption

Answer 11

Make decisions by comparing marginal costs and marginal benefits of each choice (is it worth it)

Question 12

5 Key Assumption

Answer 12

Real situations can be explained and analyzed with simple models and graphs

Question 13

Marginal

Answer 13

Additional

Question 14

Marginal Analysis

Answer 14

Making decisions based on additional benefit vs additional cost

Question 15

Trade Off

Answer 15

All alternatives that we give up whenever we choose one course of action over others

Question 16

Opportunity Cost

Answer 16

Most desirable alternative given up (second best choice)

Question 17

Utility

Answer 17

Satisfaction - what you get when goods are consumed

Question 18

Allocate

Answer 18

Distribute - people get what they want

Question 19

Scarcity

Answer 19

When people have unlimited wants, but there are limited resources. Occurs at all times for all goods (forever)

Question 20

Shortages

Answer 20

Occur when producers will not offer goods or services at current prices (temporary)

Question 21

Price

Answer 21

Amount buyer or consumer pays

Question 22

Cost

Answer 22

Amount seller pays to produce a good

Question 23

Goods

Answer 23

Tangible things that satisfy needs and wants

Question 24

Consumer Goods

Answer 24

Created for direct consumption (ex. Pizza)

Question 25

Capital Goods

Answer 25

Created for indirect consumption (goods used to make consumer goods, ex. Ovens)

Question 26

Services

Answer 26

Actions that one performs for another (ex. Teaching)

Question 27

Accountants

Answer 27

People who only look at explicit costs

Question 28

Explicit costs

Answer 28

Traditional out of pocket costs of decision making (ex. Going to kings dominion)

Question 29

Economists

Answer 29

People who look at explicit and implicit costs

Question 30

Implicit costs

Answer 30

Opportunity costs like forgone time and income (ex. Someone in NFL opens a taco shop instead of playing the sport)

Question 31

Four Factors of Production

Answer 31

Producing requires resources - all resources classified as factors Land, labor, capital, entrepreneurship

Question 32

Land

Answer 32

All natural resources used to produce goods or services (gifts of nature)

Question 33

Labor

Answer 33

Any effort a person devotes to a task that they're paid for

Question 34

Physical Capital

Answer 34

Any human made resource used to make goods or services

Question 35

Entrepreneurship

Answer 35

Leaders that combine other factors to create goods and services (ex. Shark tank). Take initiative, are innovative, and act as risk bearers to make profits

Question 36

Investment

Answer 36

Money spent by businesses to improve production (ex. new computers, factories, or phones for employees)

Question 37

Human Capital

Answer 37

Any skills gained by worker through education and experience (ex. College)