Fundamentals of Economics - Lectures 1 to 6 & Midterm 1 Prep

Fill-in-the-blank practice flashcards for economics fundamentals, rational decision making, trade, supply, demand, and midterm prep.

Economics is the study of how individuals, firms, and societies choose to use __________ resources.

scarce

Microeconomics focuses on the study of individuals, firms, households, and __________.

markets

The value of the next best option given up when making a choice is called __________.

opportunity cost

In marginal decision making, the term 'marginal' refers to the __________ unit of something.

next

A rational decision maker will consume as long as __________ is greater than __________.

$MB$; $MC$

The negative relationship between quantity and marginal benefit is known as __________ marginal benefit.

decreasing

Optimization is achieved at the decision point where __________ equals __________.

$MB$; $MC$

A table showing the possible combinations of two goods or services that can be produced given fixed resources is called a __________ schedule.

Production Possibilities

The ability to produce a good at a lower opportunity cost than another producer is defined as __________ advantage.

comparative

The Law of Demand states that as the price of a good rises, the __________ will fall, all else held constant.

quantity demanded

Demand curves slope downward due to decreasing marginal benefits, the substitution effect, and the __________ effect.

income

A change in the price of a good causes a movement along the demand curve, representing a change in __________.

quantity demanded

A change in a non-price determinant shifts the entire demand curve, resulting in a change in __________.

demand

When consumer income rises, the demand curve for a(n) __________ good shifts to the right.

normal

When consumer income rises, the demand curve for a(n) __________ good shifts to the left.

inferior

Given demand $Q_d = 25 - 2P$ and supply $Q_s = 3P$, the equilibrium price is $P =$ __________.

$$5$$

Given demand $Q_d = 25 - 2P$ and supply $Q_s = 3P$, the equilibrium quantity is $Q =$ __________.

$$15$$

At a price of $P = 4$ with $Q_d = 25 - 2P$ and $Q_s = 3P$, there is a market __________ of $5$ units.

shortage

law of demand

as a price of a good rises, the quantity demanded will fall. All else is held constant

downward sloping

Demand is what kind of slope?

as P rises, Q…..

Quantity demanded decreases

Law of demand

as the price of a good rises, the quantity demanded will fall. All else held constant 

supply curved

Qs = horizontal axis P = vertical axis

If a consumer's willingness to pay at every possible price is different

shift

Normal goods

Income rises > demand shifts right

Income falls > demand shifts left

inferior goods

Income rises > demand shifts left

Income falls > demand shifts right

law of supply

price of a good increases, quantity supplied increases

law of diminishing marginal productivity

if all inputs of production are fixed, the marginal productivity will fall all held constant

increased in supply

an increase in the quantity of a good, service or resource supplied at every price

taxes

payment made to the government from the result of economic activity

subsidy

payment from the government towards a business

supply curve shifts to the right

increase in supply

taxes and subsidies

alter cost and supply of a good or service

equilibrium

we should expect to see price and quantity converge at specific levels

equilibrium price

market clearing price is the same as