ECON MIDTERM 1

question

Incentives

answer

rewards and penalties that motivate behavior

question

Scarce

answer

when there is not enough of something

question

Great Economic Problem

answer

how we arrange our scarce resources to satisfy as many of our wants as possible

question

Opportunity Cost

answer

opportunity cost of a choice is the value od the opportunities lost

question

inflation

answer

an increase in the general level of prices

question

Absolute Advantage

answer

The ability to produce the same good using fewer inputs than another producer

question

Production possibilites frontier

answer

shows all the combinations of goods that a country can produce given its productivity and supply of inputs

question

Comparative Advantage

answer

the country has a comparative advantage in producing good for which it has the lower opportunity cost

question

Demand Curve

answer

a function that shows the quantity demanded at different prices

question

quantity demanded

answer

is the quantity that buyers are willing and able to buy at a particular price

question

customer surplus

answer

the customers gain from exchange, or the difference between the maximum price a customer is willing to pay for a certain quantity and the marker price

question

Total customer surplus

answer

is measured by the area beneath the demand curve and above the price

question

Normal Good

answer

is a good for which demand increases when income increases

question

inferior good

answer

is a good for which demand deceases when income increases

question

substitutes

answer

if two goods are substitutes a decrease in the price of one good leads to a decrease in demand for the other good

question

complements

answer

if two goods are compliments a decrease in the price of one good leads to an increase in the demand for the other good

question

Supply curve

answer

is a function that shows the quantity supplied at different prices

question

quantity supplied

answer

is the amount of a good that sellers are willing and able to sell at a particular price

question

producer surplus

answer

the producers gain from exchange or the difference between the market price and the minimum price at which a producer would be willing to sell a particular quantity

question

total producer surplus

answer

measured by the area above the supply curve and below the price

question

surplus

answer

a situation in which the quantity supplied is greater than the quantity demanded

question

Shortage

answer

is a situation in which the quantity demanded is greater than the quantity supplied

question

equilibrium price

answer

is the price at which the quantity demanded is equal to the quantity supplied

question

equilibrium quantity

answer

is the quantity at which the quantity demanded is equal to the quantity supplied

question

elasticity of demand

answer

measures how responsive the quantity demanded is to a change in price; more responsive equals more elastic

question

elasticity of supply

answer

measures how responsive the quantity supplied to a change in price

question

inelastic

answer

when the absolute value of the elasticity is less than 1

question

elastic

answer

when the absolute value of the elasticity is greater than 1

question

unit elastic

answer

when the absolute value of the elasticity is equal to 1

1 of 29

question

Incentives

answer

rewards and penalties that motivate behavior

question

Scarce

answer

when there is not enough of something

question

Great Economic Problem

answer

how we arrange our scarce resources to satisfy as many of our wants as possible

question

Opportunity Cost

answer

opportunity cost of a choice is the value od the opportunities lost

question

inflation

answer

an increase in the general level of prices

question

Absolute Advantage

answer

The ability to produce the same good using fewer inputs than another producer

question

Production possibilites frontier

answer

shows all the combinations of goods that a country can produce given its productivity and supply of inputs

question

Comparative Advantage

answer

the country has a comparative advantage in producing good for which it has the lower opportunity cost

question

Demand Curve

answer

a function that shows the quantity demanded at different prices

question

quantity demanded

answer

is the quantity that buyers are willing and able to buy at a particular price

question

customer surplus

answer

the customers gain from exchange, or the difference between the maximum price a customer is willing to pay for a certain quantity and the marker price

question

Total customer surplus

answer

is measured by the area beneath the demand curve and above the price

question

Normal Good

answer

is a good for which demand increases when income increases

question

inferior good

answer

is a good for which demand deceases when income increases

question

substitutes

answer

if two goods are substitutes a decrease in the price of one good leads to a decrease in demand for the other good

question

complements

answer

if two goods are compliments a decrease in the price of one good leads to an increase in the demand for the other good

question

Supply curve

answer

is a function that shows the quantity supplied at different prices

question

quantity supplied

answer

is the amount of a good that sellers are willing and able to sell at a particular price

question

producer surplus

answer

the producers gain from exchange or the difference between the market price and the minimum price at which a producer would be willing to sell a particular quantity

question

total producer surplus

answer

measured by the area above the supply curve and below the price

question

surplus

answer

a situation in which the quantity supplied is greater than the quantity demanded

question

Shortage

answer

is a situation in which the quantity demanded is greater than the quantity supplied

question

equilibrium price

answer

is the price at which the quantity demanded is equal to the quantity supplied

question

equilibrium quantity

answer

is the quantity at which the quantity demanded is equal to the quantity supplied

question

elasticity of demand

answer

measures how responsive the quantity demanded is to a change in price; more responsive equals more elastic

question

elasticity of supply

answer

measures how responsive the quantity supplied to a change in price

question

inelastic

answer

when the absolute value of the elasticity is less than 1

question

elastic

answer

when the absolute value of the elasticity is greater than 1

question

unit elastic

answer

when the absolute value of the elasticity is equal to 1

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ECON MIDTERM 1

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