economics
the study of how people use scarce resources to satisfy unlimited needs and wants
economic perspective
is the way economists view the world; the three interrelated features are:
scarcity of resources,
the opportunity cost of economic decisions;
how consumers and businesses exhibit purposeful behavior to increase their utility; and
marginal analysis weighin
opportunity cost
to obtain more of one thing, society forgoes the opportunity of getting the next best thing; cost of the choice
utility
the pleasure, happiness, or satisfaction obtained from consuming a good or service
marginal analysis
comparisons of marginal benefits and marginal costs, usually for decision making; maginal means 'extra'
scientific method
observing real world behavior & outcomes;
formulate an explanation of cause and effect based on the observations,
test the hypothesis;
accept, reject or modify the hypothesis; and continue to test the hypothesis if necessary
economic principle
widely accepted generalization about the economic behavior of individuals or institutions
other-things-equal assumption (ceteris paribus)
the assumption that factors other than those being considered are held constant
microeconomics
concerned with individual units; individuals, households, businesses
macroeconomics
concerned with the economy as a whole or its basic subdivisions or aggregrates, the government, business sectors
aggregate
a collection of specific economic units treated as if they were one
positive economics
focuses on facts and cause&effect relationships
normative economics
opinion based; focuses on value judgments about what the economy should be like or what policy actions should be taken to achieve a goal
society's economizing problem
resources (inputs used to produce goods and services) are scarce
budget line
a line that shows the different combinations of two products a consumer can purchase with a specific money income, given the products' prices
economic resources
the land, labor, capital and entrepreneurial ability that are used in the production of goods and services; productive agents, factors of production
land
natural resources used to produce goods and services
labor
people's physical and mental talents and efforts taht are used to help produce goods and services.
capital
human-made resources used to produe goods and services (buildings, machinery, equipment); goods that do not directly satisfuy human wants
investment
spending for the production and accumulation of capital and additions to inventories
entrepreneurial ability
the human resource taht combines the other resources to produce a product, makes nonroutine decisions, innovates, and bears risk.
factors of production
economic resources: land, capital, labor and entrepreneurial ability
consumer goods
products and services that satisfy human wants directly
capital goods
(capital) goods that do not directly satisfy human wants
production possibilities curve
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. two goods
law of increasing opportunity costs
the principle that as the production of a good increases, the opportunity cost producing an additional unit rises.
economic growth
an outward shift in the production possibilities curve that results from an increase in resource supplies or quality or an improvement in technology
2. an increase of real output (gross domestic product) or real output per capita
The assertion that "There is no free lunch" means what?
all production involves the use of scarce resources and thus the sacrifice of alternative goods.
Ben says that "An increase in the tax on beer will raise its price." Holly argues that "Taxes should be increased on beer because college students drink too much." We can conclude that:
Holly's statement is normative, but Ben's is positive.
sandra states that there is a high correlation between comsumption and income arthur replies that the correlation occurs because people consume too much of their income and dont save enough
sandras statement is positive arthurs is normative
Assume that a consumer can buy only two goods, A and B and has an income of $100. The price of A is $10 and the price of B is $20. What is the slope of the budget line if A is measured horizontally and B is measured vertically?
-0.5
tools machinery or equipment used to produce other goods would be examples of
capital goods
an entrepreneur innovates by
commercializing a new product for a market
the opportunity cost of a new public stadium is the
other goods and services that must be sacrificed to to construct the new stadium
Answer this Question on the basis of the data given in the following production possibilities table.
Capital goods 100 95 85 70 50 0
Consumer goods 0 100 180 240 280 300
If the economy is producing at production alternative D, the opportunity cost of 40 m
D) 20 units of capital goods
Answer this Question on the basis of the data given in the following production possibilities table.
Capital goods 100 95 85 70 50 0
Consumer goods 0 100 180 240 280 300
In the table above, the law of increasing opportunity costs is suggested by the fact
B) greater and greater quantities of consumer goods must be given up to get more capital goods
Answer this Question on the basis of the data given in the following production possibilities table.
Capital goods 100 95 85 70 50 0
Consumer goods 0 100 180 240 280 300
The present choice of alternative B compared with alternative D would tend to promote
C) a greater increase in economic growth in the future
What is the economic rationale for the law of increasing opportunity costs?
A) Optimal allocation and full employment of resources have not been achieved.
B) Economic resources are not completely adaptable to alternative uses.
C) Economic growth is being
B) Economic resources are not completely adaptable to alternative uses.
The underallocation of resources by society to the production of a product means that the
A) marginal benefit is greater than the marginal cost
B) marginal benefit is less than the marginal cost
C) opportunity cost of production is rising
D) consumption o
A) marginal benefit is greater than the marginal cost
Which is a normative economic statement?
A) The consumer price index rose 1.2 percent last month.
B) The unemployment rate of 6.8 percent is too high.
C) The average rate of interest on loans is 4.6 percent.
D) The economy grew at an annual rate of 3.6 pe
B) The unemployment rate of 6.8 percent is too high.
A student will decide to attend class when
the marginal benefit of attending exceeds the marginal cost of attending
Which of the following best describes the concept of utility and economic behavior?
Satisfaction from consuming goods or services.
Which of the following represents a positive economic statement?
The unemployment rate is 4.8 percent.
Which of the following represent a normative economic statement?
The government ought to lower taxes so people have more money. correct
Economic resources are the
natural, human, and manufactured inputs used to produce goods and services
Economists classify resources as
labor, land, real capital, and entrepreneurs.
Because economic resources are used to produce goods and services, they are called
factors of production or inputs
Why is money not considered to be a capital resource in economics?
Money is not considered a capital resource because money is not productive
Why is entrepreneurial ability distinct from labor even though both are considered as a category of economic resource?
Because entreprenuerial ability is not directly engaged in production
What are the major functions of the entrepreneur?
Innovate, take risks, and make decisions
. Specify the typical shapes of marginal-benefit and marginal-cost curves.
a. The marginal benefit curve is _________correct sloping.
b. The marginal cost curve is ________correct sloping.
c. With these curves, the optimal allocation of resources to a par
a. downward
b. upward
c. mb=mc
d. fewer