Economics 101 Answers

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What is the definition of Economics
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The study of the allocation of scarce means among competing ends.
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What is Scarcity
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condition that arises when wants exceed the ability to satisfy them.
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What is Opportunity Cost
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The value of the next best alternative
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Entrepreneurship
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A specific type of human capital that combines the other 3 factors of production to their best uses.
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What are 3 of the assumptions that help define the production possibilities
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1.Full employment 2. Fixed Resources 3. Fixed Technology
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⦁ The “quantity demanded” of any good or service is ________ during a specified time period and at a specified price.
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⦁ the amount people are willing and able to buy
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⦁ In stores, it is common to find seasonal products marked down when the season ends. What explains this behavior?
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⦁ The law of demand is being used to increase the quantity demanded.
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⦁ Market demand curves are obtained by
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⦁ summing the quantities every consumer is willing to buy at each different price.
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⦁ The phrase “a change in demand” most directly implies a
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⦁ shift of the demand curve.
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⦁ If the demand for used cars decreases after the price of a new car falls, used cars and new cars are
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⦁ substitute goods.
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⦁ Two brands of water, Natural Water and Mountain Water, are close substitutes. If the price of Mountain Water decreases, the fall in price
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⦁ shifts the demand curve for Natural Water leftward.
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⦁ A popular dinner among college students today is sushi, green tea, and wasabi dip so these foods are complements. If the price of green tea increases and the price of wasabi dip increases, what would be the effect on demand for sushi at lunch?
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⦁ The demand for sushi would decrease.
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⦁ If the demand for digital cameras increases when consumers’ incomes rise, then digital cameras are
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⦁ a normal good.
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⦁ Which of the following increases the demand for a good?
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⦁ the expectation that future income will be higher
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⦁ Which of the following brings only an increase in the quantity demanded of a good?
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⦁ a fall in the price of the good itself
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⦁ The quantity supplied of a good or service is the
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⦁ quantity produced at one price.
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⦁ The law of supply reflects the fact that
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⦁ suppliers have an incentive to use their resources in the way that brings the biggest return.
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⦁ Which of the following results in a movement upward along the supply curve for movies in theaters?
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⦁ an increase in the price of movie tickets
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⦁ Which of the following does NOT increase the supply of personal computers, that is, does NOT shift the supply curve of personal computers?
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⦁ a rise the price of a personal computer
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⦁ Oil refiners can refine a barrel of petroleum so that it yields either more home heating oil or more diesel fuel. If the price of diesel fuel falls, there is
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⦁ an increase in the supply of home heating oil.
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⦁ If the automobile workers’ union successfully negotiates a wage increase for its members, how does the wage hike affect the supply of automobiles?
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⦁ The supply decreases.
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⦁ An increase in the number of pineapple growers results in
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⦁ an increase in the supply of pineapples and a rightward shift in the supply curve of pineapples.
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⦁ Researchers have found a hybrid of corn that is cheaper to grow. This technological breakthrough
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⦁ increases the supply of corn.
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⦁ Which of the following shifts the supply curve for oranges?
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⦁ disastrous weather that destroys about half of this year’s orange crop
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1. Explain which of the following items are not consumption goods and services:
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⦁ A ski lift A ski lift is not a consumption good. It is capital that produces a service for skiers.
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2. Explain which of the following items are not capital goods:
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A golf ball is not a capital good. It is a consumption good.
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3. Explain which of the following items are not factors of production:
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⦁ 1,000 shares of Amazon.com stock 1,000 shares of Amazon.com stock are not a factor of production. The shares represent partial ownership of Amazon.com and therefore are financial capital.
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5. With more job training and more scholarships to poor American students, which special factor of production is likely to grow faster than in the past?
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As more people go to school and/or receive job training, the nation’s human capital will grow more rapidly. Human capital is the knowledge and skills people obtain from education, on-the-job training, and work experience. With more job training and more scholarships, human capital will grow more rapidly.
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6. Define the factor of production called capital. Give three examples of capital, different from those in the chapter. Distinguish between the factor of production capital and financial capital.
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Capital is the tools, instruments, machines, buildings, and other items that have been produced in the past and that businesses now use to produce goods and services. Capital includes railroad engines and cars, servers, and ATMs. The factor of production “capital” is the actual good itself; “financial capital,” such as stocks and bonds, are the funds that provide businesses with their financial resources which can be used to acquire capital goods.
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4. Which of the entries in the list are capital goods? Explain your choice.
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An airplane, a garbage truck, and an ATM are capital goods. All provide services to produce other goods and services. The interstate highway and the stealth bomber also are capital goods. They also provide services (transportation and defense) that help produce other goods and services.
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Graphs
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enables to visualize the relationship
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Scatter Diagram
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is a graph of the value of one variable against the value of another variable
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Time series graph
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a graph that measures time on the x-axis and the variable or variables
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Trend
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a general tendency for the value of a variable to rise or fall
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Cross section graph
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a graph that shows the values of an economic variable for different groups in a population at a time.
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slope =
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rise/run
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Scarcity
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allocation of source goods among competing ends
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Microeconomics
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focuses on individual economic units
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Macroeconomics
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focuses on aggegrate economic units
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Self-interest
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decision that make them better off
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models
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simplified representation of reality
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Ceteris Paribus
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holding all else constant
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Law of demand
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as the price of good increase the quantity demanded decrease
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Positive economics
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objective, discusses what can observed proven the way things are
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Normative economics
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subjective, invades judgement, moral stances, the way things should be
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Opportunity cost
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the value of the next best opportunity
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Consumption goods
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items bought by indviduals to meet needs and wants
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Capital goods(investments)
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goods that make other goods more productive
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Govt goods+Services
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G+S purchased by the govt for consumption or investments
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Export G+S
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produced in 1 country but sold in another
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Gross Domestic Product (GDP)
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the value of all final goods+services produced within a given time period
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Factors of Production
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Acronym: CELL Capital- tools, instruments, buildings, machinery Entrepreneurship- human resources that combines other 3 FOP (risks) Land- Nature Labor- Skills, expertise, education, human capital
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Circular flow model
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circular flow of expenditures and incomes that result from decision makers choices
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Households
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individuals or people living together as decision making units
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Firms
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institution that organize production of goods and services
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Markets
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an arrangement that brings buyers and sellers together
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Good markets
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markets in which goods and services are bought and sold
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Factor markets
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markets in which factors of production are bought and sold
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Absolute advantage
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occurs when one person can produce more than another given existing resource
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Comparative advantage
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occurs when one person can produce a good at lower opportunity cost than another
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Production possibilities
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Shows the combination of goods that a society can produce given existing resources
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Law of supply
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the price of a good increases quality supplies increase

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