Econ 101: Gateman (Midterm 1)

economics

study of the management of scarce resources to satisfy unlimited human wants

resources

factors of production, inputs

goods and services

outputs from production

production

transforming inputs into outputs

consumption

the using up of production to satisfy human wants

capital, land, labour, technology, entrepreneurship

what are the five factors of production? (inputs)

good

a tangible output is a _______

service

an intangible output is a ________

scarcity

factors being limited, and desires being unlimited can be described by ______

politics

what decides among unlimited desires or ends?

scarce good

a limited supply of a good would be defined as a ________ ________

free good

an unlimited supply of a good would be defined as a ________ ________

opportunity cost

the value of benefit of the next best forgone alternative

value, next-best, foregone, alternative

what are the four elements of opportunity cost?

production possibility curve (PPC)

a curve in which shows all possible combinations of production if all inputs are fully and efficiently employed

inefficient

inside a PPC, you can say production is _______

True

True or False? The OC of producing one more unit rises as more is produced

right

if you have the same inputs, but greater outputs, the PPC shifts _______

outward

increased productivity shifts the PPC ______

free market

spontaneous economic order, self-organizing market

concave

If the OC increases as production increases, the PPC is __________ to the origin

law of increasing marginal opportunity cost

the OC of X increases as the production of Y increases

Adam Smith

which economist relates to an "invisible hand"?

true

True of false: free markets are efficient

utility

individual consumers seek to maximize their happiness in the form of __________

profits

individual producers seek to maximize their happiness in the form of ___________

households, firms, governments, rest of the world

who are the four main players in the economic tragedy?

market

area over which buyers and sellers negotiate the exchange of a commodity

specialization of labour

workers with special skills produces specialized labour

division of labour

one product divided into individual tasks, each done by a different worker

barter

goods and services traded directly with other goods and services

comparative advantage

everyone wins when individuals specialize in doing that in which they have a ____________ ______________

globalization

_____________ is caused by advancements in transportation and communication

traditional, command, free market, mixed

what are the four types of economic systems?

traditional economy

a type of economy based on customs in an unchanging environment

command economy

a type of economy with economic decisions made by a central planning authority; is usually difficult

free market economy

a type of economy with economic decisions made by private households and firms; the price system acts to coordinate buyers and sellers

mixed economy

a type of economy that allocates and distributes by private and public sectors

voluntary, free choice

markets are based on ________ transactions and __________ __________

monopolies, externalities, public goods, asymmetrical information, merit goods

what five ways does the government deal with market failures?

normative

a value judgement is a ____________ statement

positive

a fact is a ____________ statement

false

True or false: a normative statement is testable

the law of large numbers

random movements of individuals offset one another

false

True or false: theories can be proven

true

True or false: theories can be testable

variable

an item that can take on different values

endogenous variable

a variable that is dependent

exogenous variable

a variable that is independent

motives

psychological reasoning for actions

causation

one factor causes another factor

hypothesis

propositions that can be logically inferred from assumptions

empirical observation, hypothesis, prediction, testing

what are the four steps to testing a theory?

refutation test

proper way to test a theory is to determine if it can be refuted by evidence

confirmation test

a test that yields inconclusive results by looking for evidence that confirms hypothesis

correlation

two variables that move together

index numbers

a way to compare two time series with different units of measurement and absolute values

CPI

a measure of the overall cost of the goods and services bought by a typical consumer (average)

index number

(output/base year) x 100 would compute you an ______________ ________________

cross sectional data

set of observations made at the same time across several different units

time series data

a set of observations made over time for the same unit

scatter diagram

a set of observations for pairs of variables

quantity demanded

the amount of a good or service that a consumer is willing and able to purchase at a given price

flow variable

a measure of something over an interval of time (like a movie)

stock variable

a measure of something at a particular point in time (snapshot)

demand curve

a graph of the relationship between the price of a good and the quantity demanded

right

on a demand curve, if more is desired at the same price the curve will shift to the ___________

left

on a demand curve, if less is desired at the same price the curve will shift to the ___________

income

budget of a customer, also a ceteris paribus variable

tastes

consumer preferences, also a ceteris paribus variable

advertising

used to increase tastes, also a ceteris paribus variable

price of related good in consumption

a ceteris paribus variable that is used jointly or alternatively

expectations

a forecast of the future, also a ceteris paribus variable

normal goods

goods for which demand goes up when income is higher

inferior goods

goods for which demand tends to fall when income rises

quantity supplied

the amount a supplier is willing and able to supply at a certain price

supply schedule

a table that shows the relationship between the price of a good and the quantity supplied

supply curve

a graph of the relationship between the price of a good and the quantity supplied

supply

input prices, technology, taxes/subsidies, prices of related goods, expectations and costs are all ceteris paribus variables for ______________

Equilibrium price

when quantity demanded equals quantity supplied, you have an ______________ ____________

equilibrium

"if you're going there, you'll stay there"

equilibrium

when demand = supply, you have an _____________

relative price

the ratio of absolute prices in terms of another good

price elasticity of demand

relative change in Qd/relative change in P is the equation for _______________________________________

inelastic

does a steep line represent something inelastic or elastic?

elastic

does a flat line represent something inelastic or elastic?

price elasticity of demand

what is affected by the availability of substitutes of outputs?

higher

the more/better substitutes of goods/services, the ____________ elasticity

elasticity

_____________ increases overtime due to more substitutes being produced

definition of the good, time period, budget share

the availability of substitutes of demand depends on:

inelastic

in the short run, elasticity is _____________

elastic

in the long run, elasticity is _________

price elasticity of supply

relative change in Qs/relative change in P is the equation for _______________________________________

price elasticity of supply

what is affected by the availability of substitutes of inputs?

elastic

if costs increase slowly as quantity supplied increases, supply is ___________

inelastic

if costs increase rapidly as quantity supplied increases, supply is ___________

income elasticity of demand

relative change in Qd / relative change in income represents _______________________________________

income elasticity of demand

a measure of the responsiveness of the quantity demanded to changes in income

income inelastic

if the income elasticity of demand for that good is positive but less than 1, it is ____________ _____________

income elastic

if the income elasticity of demand for that good is greater than 1, it is _______________ ________________