Chapter 1: The Fundamental Problem – Scarcity and Choice

question
Economics
answer
A study of the way in which we use scarce resources to satisfy seemingly unlimited wants
question
Economic Perspective
answer
A viewpoint that envisions individuals and institutions making rational decisions by comparing the marginal benefits and marginal costs associated with their actions
question
Scarcity
answer
The limits placed on the amount of goods and services available for consumption
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Opportunity Cost
answer
The (amount) of other products that must be sacrificed due to the production or consumption of another product
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Utility
answer
Pleasure, happiness, or satisfaction obtained from consumption
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Marginal Analysis
answer
The comparison of marginal (extra or additional) benefits and marginal costs, usually for decision making
question
Economic Principle
answer
Generalizations relating to economic behavior of individuals or institutions or the economy itself (average tendencies)
question
Ceteris Paribus
answer
(Other-things-equal assumption) The assumptions that factors other than those being considered are held constant
question
Microeconomics
answer
The part of economics concerned with decision making by individual units such as a household, firm, or industry as well as individual markets, specific goods and services, and product and resource prices
question
Macroeconomics
answer
The part of economics concerned with the performance and behavior of the economy as a whole. Focuses on economic growth, the business cycle, interest rates, inflation, and the behavior of major economic aggregates such as the household, business, and government sectors
question
Aggregate
answer
A collection of specific economic units treated as if they were one unit (ex. the prices of all individual goods and services are combined into the price level)
question
Positive Economics
answer
Facts, cause-and-effect relationships - what is; the analysis of facts or data to establish scientific generalizations about economic behavior
question
Normative Economics
answer
Incorporates value judgements about what the economy should be or ought to be by looking at desirable aspects of other economies
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Economizing Problem
answer
Individuals' unlimited wants exceed their scarce incomes, which forces them to choose between different combinations of assumptions
question
Budget Line
answer
A line that shows the different combinations of two products a consumer can purchase with a specific money income, given the products' prices
question
Economic Resources
answer
The land, labor, capital, and entrepreneurial ability that are used to produce goods and services; the factors of production
question
Land
answer
In addition to the part of the earth's surface not covered by water, this term refers to any and all natural resources ("free gifts of nature") that are used to produce goods and services
question
Labor
answer
Any mental or physical exertion on the part of a human being that is used in the production of a good or service. One of the four economic resources
question
Capital
answer
Human-made resources (buildings, machinery, and equipment) used to produce goods and services. One of the four economics resources
question
Investment
answer
In economics, spending that pays for the production and accumulation of capital goods
question
Entrepreneurial Ability
answer
The human resource that combines the other economic resources to produce new products or make innovations in the production of existing products
question
Entrepreneurs
answer
Individuals who provide entrepreneurial ability to firms by setting strategy, advancing innovations, and bearing the financial risk if their firms do poorly
question
Factors of Production
answer
The four economic resources: land, labor, capital, and entrepreneurial ability
question
Consumer Goods
answer
Products and services that satisfy human wants directly
question
Production Possibilities Curve
answer
A curve showing the different combinations of two goods or services that can be produced in a full-employment, full-production economy where the available supplies of resources and technology are fixed
question
Law of Increasing Opportunity Costs
answer
The principle that as the production of a good increases, the opportunity cost of producing an additional unit rises
question
Economic Growth
answer
An outward shift in the production possibilities curve that result from an increase in resource supplies or quality or an improvement in technology; an increase of real output or real output per capita
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question
Economics
answer
A study of the way in which we use scarce resources to satisfy seemingly unlimited wants
question
Economic Perspective
answer
A viewpoint that envisions individuals and institutions making rational decisions by comparing the marginal benefits and marginal costs associated with their actions
question
Scarcity
answer
The limits placed on the amount of goods and services available for consumption
question
Opportunity Cost
answer
The (amount) of other products that must be sacrificed due to the production or consumption of another product
question
Utility
answer
Pleasure, happiness, or satisfaction obtained from consumption
question
Marginal Analysis
answer
The comparison of marginal (extra or additional) benefits and marginal costs, usually for decision making
question
Economic Principle
answer
Generalizations relating to economic behavior of individuals or institutions or the economy itself (average tendencies)
question
Ceteris Paribus
answer
(Other-things-equal assumption) The assumptions that factors other than those being considered are held constant
question
Microeconomics
answer
The part of economics concerned with decision making by individual units such as a household, firm, or industry as well as individual markets, specific goods and services, and product and resource prices
question
Macroeconomics
answer
The part of economics concerned with the performance and behavior of the economy as a whole. Focuses on economic growth, the business cycle, interest rates, inflation, and the behavior of major economic aggregates such as the household, business, and government sectors
question
Aggregate
answer
A collection of specific economic units treated as if they were one unit (ex. the prices of all individual goods and services are combined into the price level)
question
Positive Economics
answer
Facts, cause-and-effect relationships - what is; the analysis of facts or data to establish scientific generalizations about economic behavior
question
Normative Economics
answer
Incorporates value judgements about what the economy should be or ought to be by looking at desirable aspects of other economies
question
Economizing Problem
answer
Individuals' unlimited wants exceed their scarce incomes, which forces them to choose between different combinations of assumptions
question
Budget Line
answer
A line that shows the different combinations of two products a consumer can purchase with a specific money income, given the products' prices
question
Economic Resources
answer
The land, labor, capital, and entrepreneurial ability that are used to produce goods and services; the factors of production
question
Land
answer
In addition to the part of the earth's surface not covered by water, this term refers to any and all natural resources ("free gifts of nature") that are used to produce goods and services
question
Labor
answer
Any mental or physical exertion on the part of a human being that is used in the production of a good or service. One of the four economic resources
question
Capital
answer
Human-made resources (buildings, machinery, and equipment) used to produce goods and services. One of the four economics resources
question
Investment
answer
In economics, spending that pays for the production and accumulation of capital goods
question
Entrepreneurial Ability
answer
The human resource that combines the other economic resources to produce new products or make innovations in the production of existing products
question
Entrepreneurs
answer
Individuals who provide entrepreneurial ability to firms by setting strategy, advancing innovations, and bearing the financial risk if their firms do poorly
question
Factors of Production
answer
The four economic resources: land, labor, capital, and entrepreneurial ability
question
Consumer Goods
answer
Products and services that satisfy human wants directly
question
Production Possibilities Curve
answer
A curve showing the different combinations of two goods or services that can be produced in a full-employment, full-production economy where the available supplies of resources and technology are fixed
question
Law of Increasing Opportunity Costs
answer
The principle that as the production of a good increases, the opportunity cost of producing an additional unit rises
question
Economic Growth
answer
An outward shift in the production possibilities curve that result from an increase in resource supplies or quality or an improvement in technology; an increase of real output or real output per capita