ECON 102 Exam 1 Questions with 100% Correct
Answers
Economic Analysis
People making decisions economic wat of thinking
Choices: Costs and Benefits
Performing a certain economic action will increase our well-being if the benefits are greater than
the costs (choices are the result of scarcity)
Self Interest
The pursuit of one's own goals (does not always mean increasing one's wealth; could also include
prestige, friendship, love, and feeling good)
Rationality Assumption
The assumption that people do not intentionally make decisions that leave them worse off
Incentive
A reward or punishment for engaging in an activity (positive - money, candy, extra credit,
company awards, negative - tax, spanking, jail, overdraft fees, fines)
Scarcity
Occurs when there is not enough of our "wants" at a price of zero (is not a shortage and is not the
same thing as poverty)
Definition of Economics
, The study of how people allocate their limited (scarce) resources to satisfy their unlimited wants
(the study of how people make choices)
Resources
Things used to produce goods and services to satisfy people's wants (inputs)
Wants
What people would buy if their incomes were unlimited
Microeconomics
The study of decision making undertaken by individuals (or households) and by firms (i.e.
Worker - Work overtime?, Family - Have a baby?, Firm - Advertise? How much?)
Macroeconomics
The study of the behavior of the economy as a whole (i.e unemployment rate, rate of growth in
the money supply (inflation), government's budget deficit)
Economics as a Science
Economics is an empirical (data, numbers, predictions) science, and uses models
Ceteris Paribus
All other things equal
Models
Simplified representations of the real world used as the basis for predictions or explanations
Data
Answers
Economic Analysis
People making decisions economic wat of thinking
Choices: Costs and Benefits
Performing a certain economic action will increase our well-being if the benefits are greater than
the costs (choices are the result of scarcity)
Self Interest
The pursuit of one's own goals (does not always mean increasing one's wealth; could also include
prestige, friendship, love, and feeling good)
Rationality Assumption
The assumption that people do not intentionally make decisions that leave them worse off
Incentive
A reward or punishment for engaging in an activity (positive - money, candy, extra credit,
company awards, negative - tax, spanking, jail, overdraft fees, fines)
Scarcity
Occurs when there is not enough of our "wants" at a price of zero (is not a shortage and is not the
same thing as poverty)
Definition of Economics
, The study of how people allocate their limited (scarce) resources to satisfy their unlimited wants
(the study of how people make choices)
Resources
Things used to produce goods and services to satisfy people's wants (inputs)
Wants
What people would buy if their incomes were unlimited
Microeconomics
The study of decision making undertaken by individuals (or households) and by firms (i.e.
Worker - Work overtime?, Family - Have a baby?, Firm - Advertise? How much?)
Macroeconomics
The study of the behavior of the economy as a whole (i.e unemployment rate, rate of growth in
the money supply (inflation), government's budget deficit)
Economics as a Science
Economics is an empirical (data, numbers, predictions) science, and uses models
Ceteris Paribus
All other things equal
Models
Simplified representations of the real world used as the basis for predictions or explanations
Data
