Economics ch 1-4
What is a free service?
A service with a price tag of zero.
What is an economic service?
A service with a price tag of zero.
Three reasons economics is considered a science?
Begins with observation; observations are made to predict the future; attempt to control the economy by manipulating key variables.
What character quality is essential for a Christian response to scarcity?
Contentment
What is the primary value of a production possibilities curve for an economists?
Enables the economists to see the maximum feasible amount of commodities that a business can produce when those items are competing for that business's limited resources.
What is the difference between financial capital and real capital?
Financial capital is all the money the household sector loans directly to business firms. Business firms borrow the financial capital to purchase real capital.
What are two purposes for economic models?
First to present abstract concepts to students in an understandable way. Secondly, to assist economists in predicting future events.
What is a nuisance good?
Goods that a consumer pays to have removed are said to bear a negative economic cost.
What is an economic good?
Goods that bear a positive economic cost.
What is a free good?
Goods with a price tag of zero.
What does an economist mean when he refers to the government "crowding out"?
Governmental borrowing can lead to less dollars available for business firms to use in purchasing real capital.
Economics originated from?
Greek word Oikos, which means house, and nomos, which means administration/management of.
Ludwig Von Mises is associated with what economic principle?
He is associated with a free-market thinker.
Why is Carl Menger called the Founder of the Austrian School of Economics?
His emphasis on individual economic freedom.
What is economics?
Is the common-sense science of how and why people, businesses, and government make the choices they do.
What economic functions does the government perform as illustrated in a circular flow model?
It incurs necessary expenses; purchases good and services;provides transfer payments to households
What are the four factors of production?
Land, labor, capital and entrepreneurship
What is normative economics?
Making value judgments about existing or proposed economics policies.
What four payments do business firms make in the exchange for the factors of production?
Rent, wages, interest and profit
Who identified the principle of diminishing marginal utility?
William Stanley Jevons
State the law of Demand?
a law stating that, everything else being held constant, the lower the price charged for a good or service, the greater the quantity people will demand and vice versa.
What four conditions may change the demand for a product?
change in: people's income; price of related goods; people's tastes and preferences; people's expectations
The Austrian School emphasizes these three important economic ideas?
free market, private ownership of property and limited government
What are the three functions of prices?
functions are to transmit information; provide incentives and redistribute income.
Why is the financial market necessary for the effective functioning of a developed society?
in order to grow businesses must have access to financial capital so a well-developed financial market is essential to growth.
What is a service?
is any intangible items such as labor of accountant.
What is a good?
is any tangible thing that has a measurable life span such as eyeglasses, clothing
What does utility mean?
is the amount of satisfaction the good or service provides the buyer.
What is opportunity cost?
is the satisfaction you give up or the regret you experience for not choosing differently.
What is subjective value?
states that it is an object's usefulness to the buyer that determines its worth.
What does the principle of diminishing marginal utility state?
states that people tend to receive less and less (diminishing) additional (marginal) satisfaction (utility) from any good or service as they obtain more and more of it during a specific period of time.
What English word that is used in scripture comes from the same origin as the word of economics?
steward
What is microeconomics?
study of individual people, individual households, individual businesses.
What is macroeconomics?
study of large-scale economic choices. Ex. Bank interest rates, national employment
What is positive economics?
the approach of observing economic choices and predicting economic events.
What is the economic definition of the word demand?
the number of units of products that will be bought at a given price.
What is intrinsic value?
the principle is that a thing is valuable because of the nature of the product , such as its scarcity or the amount of labor and natural resources that goes into production.
What is economic cost? and an opportunity cost?
the value people place on a good or service, and that value, in turn helps to determine the price of the good or service.
What advantage does a line graph offer over a tabular model?
this graph can provide a significantly more data.
What does the circular flow model attempt to explain?
to provide a visual explanation of how a complete national economic system functions.
What two contradictory ideas result in the necessity of choice?
unlimited wants and limited resources
