Chapter 1: Economic Thinking
What will we never do in a world of scarcity?
Meet all of society's wants
The circular flow diagram demonstrates
a direct relationship between groups in an economy
Because of our limited money, time, and effort, we are best off when we allocate those things
by constantly assessing the opportunity cost of our choices
In economics, functions often describe cause and effect. In an economic function, the variable being described on the left-hand side represents an
effect
In order to calculate an economic equation to understand its economic implications, what must one remember to do?
follow the correct order of operations
If a data line on a graphs a slope of zero it means there
is a constant relationship between x and y
Natural resources, or land can include the fertility of the land, minerals below it, and what other aspects?
livestock
What is one way to express economic theory?
mathematical equations
If an economist is trying to predict the outcome from particular causes and effects, what is the best tool for her to use in order to test out her economic model?
mathematical functions
In a world of scarcity, we will never
meet all of society's wants
When certain assumptions are used to create a model of reality, its value can be tested and determined by
predicting outcomes
The advantages that society gains through trade lie in the ability to
refine tasks associated with production specialize resources to the uses where opportunity cost is minimized
Identify the macroeconomic issue among the following statements
the average cost of producing nationally is rising
A common economic model that reveals a relationship between two types of groups interacting in marketing in an economy is called
the circular flows diagram
As life would have it, we all come to forks in our paths when we need to make a choice, knowing that
the correct choice depends upon the opportunity cost of a choice
The ability of a model to predict outcomes (accurately) is an indicator that
the model is valuable the assumption of the model are generally accurate
Identify the microeconomic topic among the following
the price that a farmer asks for her watermelons
Identify the microeconomic topics among the following
the price that a farmer asks for her watermelons
If a data line on a graph slopes down as it goes to the right, it is depicting that
the relationship between the variables in the axes is inverse as the value of one variable falls, the value of the other rises (all else constant)
Which assumptions reflect permanent universal conditions?
the world has limited productive resources more output satisfies more wants
What combination of model characteristics are frequently used it the most effective models?
useful and simple
Land, or natural resources, include the fertility of the land, minerals below it and
wind and sun
Given that spending for a certain household will always include a base amount of $1000/month, and that additional spending is equal to half of any income earned, we can predict household spending with a model y=b+mx, where
y represents spending
In the case of a positive relationship between two variables, all else remaining constant
graphically, the data line representing the relationship between the variables has a positive slope the values of the two variables will move in the same direction
The nature of the relationship between variables can be expressed by way of
graphs mathematical equations
Scarcity is a condition that is everywhere and always, since it is based upon two assumptions that reflect permanent universal conditions. The assumptions are that
more output satisfies more wants the world has limited productive resources
From the graph above, one could conclude that, all else remaining constant
the relationship between X and Y is direct
If a data line on a graph slopes upward as it goes to the right, it is depicting that
the relationship between the variables on the axes is direct
Lynne sat down to calculate the economic equation, y=12+7x18, for her economics course. What should she remember to do in order to find y?
follow the correct order of operations
Land, or natural resources, includes the fertility of the land, minerals below it, and
wind and sun
If a graph data line indicates that there is a zero slope, this means there
is a constant relationship between x and y
Society gains advantages through trade because of its ability to
refine tasks associated with production specialize resources to the uses where opportunity cost is minimized
If a model can predict outcomes (accurately), what can be assumed
the assumptions of the model are generally accurate the model is valuable
When an economist or mathematician uses equations to calculate changing economic conditions, they use variables to simplify this process. What is a variable?
the name given to a quantity that can assume a range of values
Given that spending for a certain household will always include a base amount of $1000/ month, and that additional spending is equal to half of any income earned, we can predict household spending with a model y=b+mx, where
x represents income earned