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Principles of Microeconomics Exam 1/58 Q’s and A’s (Principles of Microeconomics Exam 1)
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Principles of Microeconomics Exam 1/58 Q’s and A’s (Principles of Microeconomics Exam 1)
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Principles of Microeconomics Exam 1/58 Q’s andA’s (Principles of Microeconomics Exam 1)
Microeconomics - -the study of how
households and firms
make decisions and how
they interact in markets
-Macroeconomics - -the study of economywide
phenomena, including
inflation, unemployment,
and economic growth
-Scarcity - -the limited nature of society's
resources
-Opportunity Cost - -whatever must be
given up to obtain some item
-Consumer Surplus - -the amount a buyer is
willing to pay for a good
minus the amount the
buyer actually pays for it
-Producer Surplus - -the amount a seller is
paid for a good minus the
seller's cost of providing it
-Direct Relationship - -Two variables move in the same direction. It one
increases the other increases. If one decreases the other decreases.
-Inverse Relationship - -Two variables move in opposite directions. If one
increases the other decreases; and if one decreases the other increases.
-Independent Relationship (Zero Relationship) - -No relationship at all.
-Price Ceiling - -a legal maximum on the
price at which a good can be sold
-Price Floor - -a legal minimum on the
price at which a good can be sold
-Positive Economics - -The scientific aspect of economics that determines
"what is?"
, -Normative Economics - -The portion of economics that attempts to address
"what should be?"
-Law of Supply - -the claim that, other
things equal, the quantity supplied of a
good rises when the price of the good
rises
-Law of Demand - -the claim that, other
things equal, the quantity demanded of a
good falls when the price of the good rises
-Equilibrium - -a situation in which
the market price has
reached the level at which
quantity supplied equals
quantity demanded
-Price Elasticity of Supply - -a measure of how much
the quantity supplied of
a good responds to a
change in the price of
that good, computed as
the percentage change in
quantity supplied divided
by the percentage change
in price
-Cross Price Elasticity of Demand - -a
measure of how much the quantity
demanded of one good responds to a
change in the price of another good,
computed as the percentage change in
quantity demanded of the first good
divided by the percentage change in
the price of the second good
-Income Elasticity of Demand - -a measure
of how much the quantity demanded of
a good responds to a change in consumers'
income, computed as the percentage
change in quantity demanded divided by
the percentage change in income
-Utility - Definition - -a measure of happiness or
satisfaction
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