Econ Exam 1 Flashcard
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Economics is best defined as the
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Study of how people make choices to satisfy their wants.
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In economic analysis, people's resources are
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Limited and their wants are unlimited.
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In economics, items that are used to produce goods and services are known as
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Resources
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Economics is a part of the
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Social sciences.
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Microeconomics is defined as that part of economic analysis that
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Studies individual decision making by households and firms.
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Macroeconomics is the study of
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Aggregate economic variable.
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One topic of study for a microeconomist would be the
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Effects of a gasoline price increase on consumer behavior.
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Which of the following would likely be studied in a macroeconomics course?
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All of the above (the unemployment rate, total output for an economy, the inflation rate)
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Another word for "aggregate" is
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Total.
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An economic system is
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A mechanism to allocate scarce resources.
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Which of the following is NOT one of the basic questions that an economic system attempts to answer?
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How to eliminate choices?
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What is the type of economic system that relies on one central authority to make economic decisions?
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Command system.
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A mixed economic system is best described an economy with a mix of
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Free markets and government control.
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In a market system, _____provide signals about whether resources are relatively scarce or abundant.
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Prices
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Economists assume that people are motivated by
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Rational self-interest
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The potential rewards that are available if a particular activity is undertaken are known as
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Incentives.
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If the government offers to reduce your property taxes by 10% if you install solar heating for your home, this would be an example of
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Incentives
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A simplified representation of the real world that is used to explain economic phenomena is a(n)
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Model
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Holding all variables constant but one assessing the impact of the one variable that has changed is an example of
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The ceteris paribus assumption
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Why is economics called an empirical science?
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because economics relies on real-world data to determine the usefulness of a model.
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In the production of goods and services, trade-offs exist because
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society has only a limited amount of productive resources.
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The difference between scarcity and a shortage is that
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scarcity always is a part of human life while shortage s usually are temporary.
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In 2006, hurricanes damaged many parts of Texas, destroying homes, businesses, schools, and infrastructure. In strictly economic terminology, these hurricanes are said to have caused
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shortages, because supplies were cut off and goods were destroyed.
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Human resources that perform the functions of organizing, managing, and assembling the other factors of production are called
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entrepreneurs.
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In economic terminology, when a resource is used to produce is used to produce output it is referred to as
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a factor of production.
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Physical capital is distinguished from a human capital because
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physical capital rears to equipment and machinery, whereas human capital refers to trained people.
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Human capital is
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the accumulation of skills, training and education of workers.
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Economic goods are defined as
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anything from which an individual derives satisfaction.
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A tractor used to prepare land for planting is called
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physical capital.
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Naturally occurring diamonds are an example of
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land.
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Opportunity cost is defined as
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the value of the next-best alternative that must be sacrificed to attain a want.
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Opportunity costs arise from
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choices.
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The production possibilities curve represents
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the maximum combination of goods and services that can be produced with fixed resources and technology, given efficient use of the resources.
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A country operates inside its production possibilities curve, this may be caused by
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unemployment resources.
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How is economic growth shown by the production possibilities curve?
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by shifting the curve to the right.
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Generally, if a nation produces more consumer goods than capital goods
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less of all goods may be produced in the future.
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Comparative advantage is
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when a country can produce a good at a lower opportunity cost compared to other countries.
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Which is the best example of specialization?
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a high school math teacher who teaches only calculus.
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Absolute advantage is
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producing a good using the fewest inputs.
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A person has a comparative advantage in an activity whenever she
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can perform the activity at a lower opportunity cost than another person can.
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In economics, "demand" refers to
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the quantities of a good that people will buy at various prices.
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The law of demand states that
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quantity demanded will vary inversely with the price of the good.
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A fundamental principle in demand analysis is that a change in price leads to
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a movement along the demand curve.
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The money price of a good is that price
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expressed in today's dollars.
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The relative price of a good is that price
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expressed in terms of the price of another good.
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Markets are
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a mechanism through which prices of goods and services are determined by the forces of supply and demand.
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Ceteris paribus, as the price of a good or service increases,
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people will buy less of it.
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The demand curve shows the relationship between quantity demanded and
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price.
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A demand curve
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slopes down because of the inverse relationship between price and quantity demanded.
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Adding the quantities demanded by all consumers at every price will yield
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the market demand curve.
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If a decrease in the price of good A causes a decrease in demand for good B, the two goods are
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substitutes.
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Assuming that turkey, chicken, pork, and beef are substitutes, suppose that the price of turkey has fallen. This will, other things being equal
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reduce demand for chicken, pork, and beef.
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The quantity supplied of a particular good is the amount of the good that
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firms are willing to sell at each price during a particular time period.
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According to the law of supply,
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producers provide less of a good when the price decreases
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A given supply curve illustrates
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the relationship between price and quantity supplied.
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For typical goods, supply curves are
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upward sloping
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Total market supply can be derived by
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horizontally summing individual supply curves at each and every price level.
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Other things being equal, an increase in wages paid to workers in the steel industry will cause
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the supply to decrease.
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An improvement in technology in the production of computers would
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increase the supply of computers.
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There will be an increase in supply when
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there is an improvement in technology.
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A country's labor force is equal to
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the total number of employed and unemployed people.
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The term "unemployment" is best described as the total number of
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adults who are looking for work but have not found a job.
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Individuals who have stopped looking for work because they are convinced that they will not find a job are considered
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discouraged workers.
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The rate of unemployment is calculated as the number of
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unemployment divided by the number of people in the civilian labor force.
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To be officially counted as unemployed, a person must be
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at least 16 years old.
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Costs of unemployment will always exist since
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the output lost due to the fact that the economy is not running at full employment.
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Frictional unemployment include
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some workers will always want to make a job transition.
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Bob's assembly line job has been replaced by robots, and Bob lacks abilities and skills required to attain other jobs. He is considered
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structurally unemployed.
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A lifeguard who is out of work in the winter is
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seasonally unemployed.
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Cyclical unemployment occurs when
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a downturn in economic activity decreases employment.
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Inflation is best described as a situation in which
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the average of all prices are on a sustained rise over a period of time.
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A sustained decrease in the average of all prices of goods and services in the economy is known as
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deflation.
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The rate of inflation and the purchasing power of money are
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inversely related.
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The consumer price index shows
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the cost of today's goods expressed in terms of the cost of goods in a base year.
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The value of money for buying goods and services is known as
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purchasing power.
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The year that is chosen as the point of reference for comparison of prices in other years is known as the
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base year.
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The GDP deflator is a
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price index measuring the changes in prices of all new goods and services produced in the economy.
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Fully anticipated inflation occurs when
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the actual inflation rate equals the anticipated inflation rate.
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Who stands to gain as a result of unanticipated inflation?
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Debtors.
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A COLA is
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an automatic increase in wages that takes into account increases in the price level.
