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ECON 201 EXAM #1 Terms With Questions And 100% ALL CORRECT ANSWERS
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JACKLINEECON 201 EXAM #1 Terms With Questions And 100% ALL CORRECT ANSWERS
Terms in this set (86)
The study of the choices consumers, business managers, and government officials make to
Economics
attain their foals, give scarce resources.
Scarcity Although our wants are unlimited, the resources available are not.
People are rational. People respond to economics incentives. Optimal decisions are made at
3 Key Economic Ideas
the margin.
Tradeoffs Producing more of one good or service means producing less of another good or service.
Opportunity Cost The highest valued alternative that must be given up to engage in an activity.
Centrally Planned Economy An economy in which the government decides how economic resources will be allocated.
An economy in which the decisions of households and firms interacting in markets allocate
Market Economy
economic resources.
Market Economy Households and firms
Centrally Planned Government
ECON 201 EXAM #1 Terms
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, An economy in which most economic decisions result from the interaction of buyers and
Mixed Economy sellers in markets but in which the government plays a significant role in the allocation of
resources.
Productive Efficiency When a good or service is produced at the lowest possible cost.
A state of the economy in which production is in accordance with consumer preferences; in
Allocative Efficiency particular, every good or service is produced up to the point where the last unit provides a
marginal benefit to society equal to the marginal cost of producing it.
Decide on the assumptions to use in developing the model. Formulate a testable hypothesis.
Steps Economists use to make a useful economic
Use economic data to test the hypothesis. Revise the model if it fails to explain the economic
model
data well. Retain the revised model to help answer similar economic questions in the future.
Economic Variable Something measurable that can have different values, such as the incomes of doctors.
Hypothesis Statement that can be correct or incorrect about an economic variable.
Equity The fair distribution of economic benefits.
Positive Analysis Analysis concerned with what is.
Normative Analysis Analysis concerned with what ought to be.
Example of Positive Analysis Minimum wage is $7.25
Example of Normative Analysis Minimum wage should be $8.00
The study of how households and firms make choices, how they interact in markets, and how
Microeconomics
the government attempts to influence their choices.
The study of the economy as a whole, including topics such as inflation, unemployment, and
Macroeconomics
economic growth.
increasing the production of a good requires larger and larger decreases in the production of
Increasing Marginal Opportunity Cost
another good.
Production Possibilities Frontier (PPF) Will be bowed outward.
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