ECON 2003 Test 1 Study Guide - Custom Scholars
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ECON 2003 Test 1 Study Guide

question
scarcity of resources
answer
Limited availability of resources
question
economics
answer
the study of how individuals and societies allocate scarce resources among many competing uses
question
microeconomics
answer
The study of economics at the small-scale level, examining individuals and specific markets.
question
macroeconomics
answer
The study of economics at the large-scale level, examining total output, the price level, and other aggregate measures in the economy.
question
opportunity cost of an action
answer
The value of the best alternative that must be given up to pursue the action
question
rational decision makers
answer
Anyone that will choose what gives the highest value/utility for them, among all choices.
question
law of supply
answer
holding everything else constant, if the price of a good increases, the quantity supplied should increase (and if the price of a good decreases the quantity supplied should increase).
question
demand
answer
a correspondence that shows, at each price of a good what is the quantity that consumers are willing and able to buy (quantity demanded), holding everything else constant.
question
supply
answer
a correspondence that shows, at each price of a good what is the quantity supplied, holding everything else constant
question
law of demand
answer
holding everything else constant, if the price of a good increases, the quantity demanded should decrease (and if the price of a good decreases the quantity demanded should increase)
question
T/F: I) Assume that goods A and B are substitutes. Suppose technology improves for the production of good A and assume there is a decrease in the price of good B. If everything else remains the same, in the market of good A, the equilibrium price decreases but the effect on the equilibrium quantity depends on the magnitude of the shifts in supply and demand.
answer
true
question
Suppose you observed that the equilibrium price has decreased in the market for good X. The only change that has happened in that market is that the income of all consumers has increased. What can be said about the relationship between income and the demand of the good?
answer
There must be an inverse relationship, therefore good X is an inferior good.
1 of 12
question
scarcity of resources
answer
Limited availability of resources
question
economics
answer
the study of how individuals and societies allocate scarce resources among many competing uses
question
microeconomics
answer
The study of economics at the small-scale level, examining individuals and specific markets.
question
macroeconomics
answer
The study of economics at the large-scale level, examining total output, the price level, and other aggregate measures in the economy.
question
opportunity cost of an action
answer
The value of the best alternative that must be given up to pursue the action
question
rational decision makers
answer
Anyone that will choose what gives the highest value/utility for them, among all choices.
question
law of supply
answer
holding everything else constant, if the price of a good increases, the quantity supplied should increase (and if the price of a good decreases the quantity supplied should increase).
question
demand
answer
a correspondence that shows, at each price of a good what is the quantity that consumers are willing and able to buy (quantity demanded), holding everything else constant.
question
supply
answer
a correspondence that shows, at each price of a good what is the quantity supplied, holding everything else constant
question
law of demand
answer
holding everything else constant, if the price of a good increases, the quantity demanded should decrease (and if the price of a good decreases the quantity demanded should increase)
question
T/F: I) Assume that goods A and B are substitutes. Suppose technology improves for the production of good A and assume there is a decrease in the price of good B. If everything else remains the same, in the market of good A, the equilibrium price decreases but the effect on the equilibrium quantity depends on the magnitude of the shifts in supply and demand.
answer
true
question
Suppose you observed that the equilibrium price has decreased in the market for good X. The only change that has happened in that market is that the income of all consumers has increased. What can be said about the relationship between income and the demand of the good?
answer
There must be an inverse relationship, therefore good X is an inferior good.

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