question

demand

answer

term for the relationship between a good's price and the amount that people are willing to buy

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supply

answer

term for the relationship between a good's price and the amount that producers are willing to provide for consumers

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value in use and value in exchange

answer

the two chief types of value

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value in use

answer

term for value that is directly related to the benefits the owners of goods receive through their use

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value in exchange (trading value)

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term for what a particular good is worth in exchange for some other good

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price

answer

term for the amount of money that a buyer pays the seller for a particular item

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market prices

answer

term for those prices at which goods can be sold in an open market with many potenetial sellers and buyers

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marginal utility

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term for the amount of satisfaction that results from a one-unit increase of a product

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diminishing marginal utility

answer

principle that states that as one's supply of a specific good or service increases, the satisfaction derived from each additional unit tends to decrease

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total utility

answer

term for the total amount of satisfaction received from possessing a particular amount of a good

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law of demand

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the fundamental economic principle which explains the inverse relationship between the price of a good and the amount that people choose to buy

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price, decreases

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"Other things remaining equal, as the ____ of a good *increases*, the quantity demanded _______ in a free market economy." (law of demand)

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amount bought

answer

In order to know if demand for an item is high or low, we must be able to show the ______ _____ over a length of time.

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income effect and substitution effect

answer

two effects used to explain why price changes influence the quantity demanded of a good

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income effect

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the effect that says that when the price of a good falls, consumers tend to buy more of that good or of other items because they can do so without giving up anything

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substitution effect

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the effect that indicates that people tend to substitute less expensive goods for ones whose prices have risen

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price, behavior

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For everyone there is a point at which ____ becomes the decisive consideration, the point at which a consumer alters his economic ______.

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demand schedule

answer

term for a list of numbers that compares price with quantity demanded

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demand curve

answer

term for a graphic representation of the quantitity of good purchased at different prices

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prices, quantity

answer

In economic graphs, the vertical axis traditionally represents ____, while the horizontal axis shows the ____.

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downward, right

answer

Because of the inverse relationship between price and quantity, the *demand curve* always slopes ______ and to the ____.

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*ceteris paribus*

answer

Latin phrase that means "other things being equal"

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tastes and preferences; income; population; prices of related goods; and consumer expectations

answer

five key factors that can shift the economic demand curve

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normal good

answer

term for a good whose demand is directly related to consumers' incomes

question

inferior good

answer

term for a good whose demand decreases as consumers incomes increase, and vice versa

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substitute

answer

term for a good capable of being used in place of another

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complement

answer

term for a good often used in conjunction with another

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law of supply

answer

the basic economic principle which states the direct relationship between the price of a good and the amount that suppliers will make available

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price, quantity supplied

answer

"Other things remaining equal, as the ____ of a good *increases*, the _____ _____ also *increases* in a free market economy." (law of supply)

question

supply schedule

answer

term for a list of numbers that compares price with quantity supplied

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supply curve

answer

term for a graphic presentation of the quantity of goods supplied at different prices

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quantity supplied

answer

Any single point along a supply curve depicts the ____ ____ at the corresponding price.

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upward, right

answer

Because of the direct relationship between price and quantity supplied, the *supply curve* always slopes ______ and to the ____.

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technology; resource prices; prices of related goods; number of sellers; producer expectations; and government taxes, subsidies, and regulations

answer

six factors that can increase or decrease the entire supply of goods

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subsidies

answer

term for money that the government provides to businesses in order to encourage production

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price, existing supply

answer

A change in the *quantity supplied* is caused only by a change in ____ within a(n) ______ _____.

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customer, satisfy

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"What pays under capitalism is satisfying the common man, the ______. The more people you _____, the better for you." --Ludwig von Mises

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money, information

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"Prices are important not because _____ is paramount but because prices are a fast and effective conveyer of _______ through a vast society in which fragmented knowledge must be coordinated." --Thomas Sowell

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equilibrium

answer

term for the point at which quantity demanded and quantity supplied are equal

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shortage

answer

term for the situation in which the quantity demanded exceeds the quantity supplied at a given price

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surplus

answer

term for the situation in which the quantity supplied exceeds the quantity demanded at a given price

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elastic

answer

In most cases, demand is _____: if prices go up, people will buy less.

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price elasticity of demand

answer

term for the phenomenon of people buying less as prices go up

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substitutes

answer

The availability of ______ is a major reason why the demand for most goods is elastic.

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inelastic

answer

If consumers will pay very high prices for a particular commodity because they feel there are no substitutes, we say that the demand for that good is _____.

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Ronald Reagan

answer

person who said "Only when the human spirit is allowed to invent and create, only when individuals are given a personal stake in deciding economic policies and benefiting from their success-- only then can societies remain economically alive, dynamic, progressive, and free."

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overproduction or underproduction

answer

two possible results of price fixing by governments

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price ceiling

answer

term for a government-placed limit on how high a producer may charge for his product

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profits

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"The desire of businessmen for ____ is what drives prices down unless forcibly prevented from engaging in price competition usually by governmental activity." --Thomas Sowell

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price floors

answer

term for price levels set above the equilibrium prices

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profit, penury

answer

"In all labour there is ____: but the talk of the lips tendeth only to _____." --Proverbs 14:23

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market signals

answer

term for signs that are used by consumers and producers to determine how much of a good to buy or sell at a given price and time

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market

answer

term for a means through which sellers and buyers exchange goods

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nondurable goods

answer

term for goods that have a life expectancy of less than three years

question

durable goods

answer

term for goods which are expected to last at least three years

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consumers

answer

In a free market economy, it is the ______ who determine what goods are to be produced and in what quantity.

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traditional economic system

answer

term for the type of system which gives people only limited choices regarding what to produce and consume

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command economy

answer

term for the type of economic system that is ruled by some type of centralized government that has the power to compel people to obey its economic decrees

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government, souls, thoughts

answer

"You cannot extend the mastery of ______ over the daily life of a people without somewhere making it master of the people's ___ and _____." --Herbert Hover

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totalitarian government

answer

term for any government that possesses absolute, compelling power

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black markets

answer

term for illegal systems of exchanging goods to avoid governmental regulations

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Winston Churchill

answer

person who said, "Some see private enterprise as a predatory target to be shot, others as a cow to be milked, but few are those who see its as a sturdy horse pulling the wagon."

question

private sector

answer

term for the part of an economy that is controlled by private individuals, businesses, and organizations

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public sector

answer

term for the part of an economy which is controlled by national, state, and local governments

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profit motive

answer

term for the desire to work to improve one's economic situation

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Dwight D. Eisenhower

answer

person who said, "When the shallow critics denounce the profit motive inherent in our system of private enterprise, they ignore the fact that it is an economic support of every human right we possess and without it, all rights would soon disappear."

question

depreciation

answer

term for the diminishing of the value of goods that is caused by wear and time

question

profit

answer

term for the excess of the total revenue paid by buyers for goods over the seller's total expense of producing those goods

question

opportunity cost

answer

term for the value of the best alternative that is foregone when a different alternative is taken

question

wage of management

answer

term for what it would cost people who run their own establishment to hire managers to run the businesses for them

question

equity

answer

term for the total value of a business minus any liabilities

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False

answer

True or False: Most businesses make profits.

question

competition

answer

In a market economy, prices for consumers are kept low because _______ among sellers makes profits rare.

question

rich, entrepreneurs

answer

"Those fighting for free enterprise and free competition do not defend the interest of those ____ today. They want a free hand left to unknown men who will be the _______ of tomorrow." -Ludvig von Mises

question

riches, wealth, eat

answer

"Every man also to whom God hath given _____ and _____ and hath given him power to ___ thereof, and to take his portion and to rejoice in his labour; this is the gift of God." --Ecclesiastes 5:19

Abeka Chapter 2 Test Economics Work And Prosperity – Flashcards

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