Economics Test 1
What is the law of diminishing marginal utility?
Additional units provide less and less additional utility over a short time period.
Identify the cause of scarcity. What is scarcity? Why is scarcity the main idea in economics?
Scarcity is society not having enough resources to produce all the things people would like to have
What is a trade-off?
an exchange that occurs as a compromise
What is inelastic demand?
an increase or decrease in price will not significantly affect demand for the product
Explain why economic education is important.
it helps people become better decision makers
Why do we use substitute goods?
products are often substituted if the demand for one product increases when the price of the other goes up
Why do we use rational decision making regarding economics?
rational choice theory is a theory of economics that assumes that individuals always make decisions that provide them with the highest amount of personal utility
What is entrepreneurial ability?
the ability to bring together the other factors of production to successfully produce and sell goods and services
What is GDP?
the dollar value of all final goods and services
Describe the factors of production required to deliver a service like education. (What are the factors of production)
-Land (gifts of nature) -capital (tools needed) -labor (people with effort and ability) -entrepreneurs (risk takers)
Distinguish b/t product markets and factor markets.
A product market where goods and services are offered for sale. A factor market is a market where productive resources are bought and sold.
Describe incremental decision making.
Making decisions with small steps so the businesses can determine the true cost between alternatives
What is the difference between macroeconomics and microeconomics?
Macro: seeks to find a general perspective Micro: focuses on the individual's perspective
Describe the nature of an opportunity cost. What is opportunity cost?
Opportunity costs are the cost of the next best alternative use of money, time, or resources when one choice is made over the other. They represent the potential benefits an individual, investor, or business misses out on when choosing one alternative over the other.
How is technology a resource multiplier?
Technology is the key driver of economic growth of countries, regions, and cities.
What is the difference between a scarcity curve and a production possibilities curve?
The PPF illustrates scarcity by dividing production space into attainable and unattainable levels of production.
Describe the relationship b/t goods, services, and consumers.
The consumer is a person who uses goods and services to satisfy wants and needs. Consumers buy the goods that grow the economy.
Identify the economic concept illustrated by the production possibilities frontier.
The production possibility frontier demonstrates that the production of one commodity may increase only if the production of the other commodity decreases
Explain why economics is considered a social science. What is economics?
The study of the ownership, use, and exchange of scare resources. It is a social science because it uses scientific methods to build theories that can help explain the behavior of an organization.
Explain TINSTAAFL? What does it mean?
There is no such thing as a free lunch. Meaning when things are free to one person, someone else is paying for it
True or False: Technology is a resource multiplier. Explain.
True. Technology expands the economy.
Explain the production possibilities frontier.
a graph that shows the combinations of output that the economy can possibly produce given the available factors of production and the variable production technology
What is a scientific field that focuses on creating machines that require intelligence?
computer science is the scientific field that focuses on creating machines with AI
Explain why economists argue that productivity is important.
economic growth occurs when a nation's total output of goods and services increases over time and productivity is the measure of the amount of inputs and outputs.
What is utility?
the want-satisfying power of a good or service
Explain why services are excluded from the measure of wealth.
they are intangible
