CLS Unit 1 Quiz

Economics

The study of how people, businesses, and societies make choices to use limited resources.

Trade-off

Giving up one option in order to gain another.

Resource

Anything used to produce goods and services.

Factor of production

Basic inputs (land, labor, capital, entrepreneurship) needed to make goods and services.

Land

Natural resources used in production.

Labor

Human effort, skills, and time used in production.

Capital

Tools, machines, and buildings used to make goods and services.

Entrepreneurship

The ability to organize resources and take risks to create businesses.

Scarce

Limited in quantity compared to wants.

Opportunity cost

The value of the next best alternative given up when making a choice.

Microeconomics

The study of individual households, firms, and markets.

Household

A person or group that consumes goods and services.

Firm

A business organization that produces goods or services.

Macroeconomics

The study of the economy as a whole, including growth, inflation, and unemployment.

Model

A simplified representation of reality used to study economic behavior.

“Other things equal” (ceteris paribus) assumption

Holding all other factors constant while examining one change.

Production possibilities curve

A graph showing the maximum possible output combinations of two goods.

Efficient

Using resources in a way that maximizes output with no waste.

Economic growth

An increase in the ability to produce goods and services over time.

Technology

The knowledge and methods used to make production more efficient.

Trade

The exchange of goods and services between people or countries.

Specialization

Focusing on producing one good or task to increase efficiency.

Comparative advantage

The ability to produce something at a lower opportunity cost than others.

Absolute advantage

The ability to produce more of a good with the same resources than others.

Terms of trade

The agreed rate at which goods are exchanged in trade.

Supply and demand model

A graph showing how buyers and sellers interact to set prices.

Demand schedule

A table showing how much consumers will buy at different prices.

Quantity demanded

The specific amount consumers are willing to buy at one price.

Demand curve

A graph showing the relationship between price and quantity demanded.

Law of demand

As price falls, quantity demanded rises (and vice versa).

Change in demand

A shift of the entire demand curve caused by factors other than price.

Movement along the demand curve

A change in quantity demanded due to a price change.

Substitutes

Goods that can replace each other in consumption.

Complements

Goods that are often used together.

Normal good

A good people buy more of when their income increases.

Inferior good

A good people buy less of when their income increases.

Quantity supplied

The specific amount producers are willing to sell at one price.

Supply schedule

A table showing how much producers will sell at different prices.

Supply curve

A graph showing the relationship between price and quantity supplied.

Law of supply

As price rises, quantity supplied rises (and vice versa).

Change in supply

A shift of the entire supply curve caused by factors other than price.

Movement along the supply curve

A change in quantity supplied due to a price change.

Input

A resource used to produce goods and services.

Substitutes in production

Goods that can be made with the same resources instead of each other.

Complements in production

Goods that are produced together from the same process.

Equilibrium

The point where supply equals demand in a market.

Equilibrium price

The price where quantity demanded equals quantity supplied.

Equilibrium quantity

The amount bought and sold at the equilibrium price.

Disequilibrium

When supply and demand are not balanced.

Surplus

When quantity supplied is greater than quantity demanded.

Shortage

When quantity demanded is greater than quantity supplied.