Econ100 Unit 1 Guide

What is economics?

 A study of how people make choices to achieve goals with resource constraints. 

What is meant by “the invisible hand?”

The “invisible hand” means that the division of labor and exchange occurs naturally among people without being directed by anyone. 

What is the root of exchange behavior?

Human natural tendency toward division of labor to gain efficiency.

Division of labor and exchange are human tendencies to enhance one’s self-interest. Can contributing to charities to assure everyone in one’s community has access to food, housing and health care be consistent with the principles of self-interest?

Yes

What is scientific about Social Science?

Social scientists use the scientific method to test hypotheses about human behavior.

What is the contribution of The Wealth of Nations published by Adam Smith in 1776?

Adam Smith described how people made production and consumption decisions in the 18th Century. 

What is a market as discussed in an economics class?

The coming together of suppliers and demanders of goods and services. 

What do consumers want to achieve?

 Maximize personal satisfaction.

As the price of gasoline continues to rise,

The quantity consumed will decline as consumers respond to higher prices. 

Why would producers offer more of a product as price rises?

Because producers can justify using more expensive inputs when product prices are high. 

What is the principal communication device between producers and consumers in a free market?

Price

From an economic perspective, a choice is:

A decision that must be made because resources are scarce. 

You know you have incurred a cost when:

You must give up something you wanted when making a choice. 

Why do we tend to see specialization and trade develop at the same time?

Specialization increases productivity, so trade must increase because no one remains self-sufficient. 

In a free market, competition involves:

Buyer competing against buyer, and seller competing against seller.