Economics Test

Three things people choose to use scarce resources; economics involves:

Examining
Organizing, analyzing, and interpreting data
Developing theories and economic laws

_______________ affecta everyone

scarcity

Scarcity leads to 3 economic questions

What will be produced?
How will it be produced?
For whom will it be produced?

Factors of Production

land, labor, capital, entrepreneurship

Incentives

benefits offered to encourage people to act in certain ways

Utility

benefit of satisfaction gained from the use of a good or service

Economize

cutting cost when making decisions

___________ powers an economy

choice

___________ the alternative that you give up when you make an economic choice

Trade-off

the practice of examining the costs and the expected benefits of a choice as an aid to decision making

Cost-benefit analysis

the cost of using one more unit of a good or service

Marginal cost

the benefit or satisfaction received from using one more unit of a good or service

Marginal benefit

the founder of economics

Adam Smith

Production possibilities curve- a graph that illustrates the impact of scarcity on an economy by showing the maximum number of goods or services that can be produced using limited resources- PPC assumptions are:

Resources are fixed
All resources are fully employed
Only two things can be produced
Technology is fixed

the condition in which economic resources are being used to produce the maximum amount of goods and services; the dots on the line of the graph

Efficiency

the condition in which economic resources are not being used to their full potential; dots to the left of line/under

Underutilization

there are not enough resources for this; dots above/to the right of the curve

Impossibility

Three things that cause PPC to shift

Adding resources
More labor
New technology

numerical data or information that show patterns of behavior

Statistics

to help explain why things are the way they are and predict future economic activity

Why do economists use models?

the study of the behavior of individual players in an economy (small)

Microeconomics

the study of the behavior of the economy as a whole (big)

Macroeconomics

a way of describing and explaining economics as it is, not as it should be

Positive economics

a way of describing and explaining what economic behavior ought to be, not what it actually is

Normative economics

People have _________

wants