Unit One

Question 1

Economics

Answer 1

Economics is the study of how people satisfy wants with their scarce resources.

Question 2

Microeconomics

Answer 2

The study of the choices made by economics such as households, companies, and individuals.

Question 3

Macroeconomics

Answer 3

Examines the behavior of entire economies.

Question 4

Goods

Answer 4

Physical objects that someone produces: ie. food, clothing, etc.

Question 5

Services

Answer 5

Are actions or activities that one person performs for another: ie. medical care, plumber, etc.

Question 6

Scarcity

Answer 6

The condition where unlimited human wants face limited resources.

Question 7

Shortage

Answer 7

Occurs when consumers want more of a good or service that producers can or are willing to make available at a particular price.

Question 8

Entrepreneurs

Answer 8

Are the people who decide how to combine resources to create new goods and services. (Starting a business small or big)

Question 9

Factors of Production

Answer 9

Resources necessary to produce what people want or need.

Question 10

Physical Capital

Answer 10

Human made objects used to create other goods and services

Question 11

Human Capital

Answer 11

The knowledge and skills a worker gains through education and experience

Question 12

Analysis

Answer 12

Looks at the “why” and “how” of economic activity–why prices go up or down, for example, or how taxes affect savings.

Question 13

Explanation

Answer 13

Refers to how economists communicate knowledge of the economy and its activities to the society’s population.

Question 14

Prediction

Answer 14

Refers to how yesterday’s and today’s economic activities advise us of potential future activity.

Question 15

Durable Goods

Answer 15

Goods that last for at least 3 years when used regularly.

Question 16

Non-Durable Goods

Answer 16

Item that lasts for fewer than 3 years when used regularly.

Question 17

Capital Goods

Answer 17

A tool or good such as machinery or equipment that is used by businesses to produce other products.

Question 18

Consumer Goods

Answer 18

A good intendent for fine use.

Question 19

Consumers

Answer 19

The people who purchase things; they use goods and services to satisfy wants and needs.

Question 20

Producers

Answer 20

The people (businesses) who make things that satisfy consumers’ needs and wants.

Question 21

Value

Answer 21

Worth expressed in dollars and cents. Scarcity by itself is not enough to create value. For something to have value, it must also have utility.

Question 22

Utility

Answer 22

A good’s or service’s capacity to provide satisfaction, which varies with the needs and wants of each person.

Question 23

Wealth

Answer 23

The accumulation of goods that are tangible, scarce, useful, and transferable to another person.

Question 24

Trade-Offs

Answer 24

The alternative choices people face in making an economic decision. A decision-making grid lists the advantages and disadvantages of each choice.

Question 25

Opportunity Cost

Answer 25

The cost of the next best alternative among a person’s choices. The opportunity cost is the money, lime, or resources a person gives up, or sacrifices, to make his final choice.

Question 26

Guns or Butter

Answer 26

A common phrase to describe the choices facing governments: the choice between spending money on military or domestic needs.

Question 27

Thinking at the Margin

Answer 27

Adding or subtracting one unit, such as one hour or one dollar, deciding how much more or less to do.

Question 28

Cost-Benefit Analysis

Answer 28

Comparing the opportunity cost and the benefits or what you will sacrifice and what you will gain.

Question 29

Marginal Cost

Answer 29

The extra cost of adding one unit, ie. sleeping one extra hour or building one extra house.

Question 30

Marginal Benefit

Answer 30

The extra benefit of adding the same unit as long as the marginal benefits exceed the marginal costs, or it pays to have one more unit.

Question 31

Production Possibilities Curve

Answer 31

A graph that shows alternative ways to use an economy’s productive resources. The production possibilities frontier diagram illustrates the concept of opportunity cost.

Question 32

Absolute Advantage

Answer 32

When a person or nation can produce more of a given product than another person or nation using a given amount of resources.

Question 33

Law of Comparative Advantage (LOCA)

Answer 33

A nation is better off when it produces goods and services for which it had a comparative advantage, each nation can then use the money it earns selling goods and services it makes efficiently and buy goods and services it doesn’t.