ECON 160 - MIDTERM EXAM 1
scarcity - ANSWER...-the limited nature of society's resources.
theres not enough to go around, so if there isn't enough to go around you have to make
compromise
economics - ANSWER...-the study of how people allocate their limited resources to
satisfy their nearly unlimited wants. its the study of the choices that people make in all
different context
microeconomics - ANSWER...-study of the individual units that make up the economy
macroeconomics - ANSWER...-study of the overall aspects and workings of an
economy, such as inflation, growth, employment, interest rates, and the productivity of
the economy as a whole
1. incentives
2. trade-offs
3. opportunity cost
4. marginal thinking
5. trade - ANSWER...-5 foundations of economics
incentive - ANSWER...-first principle:
- factors that motivate you to act or to exert effort.
the engine of economic growth
- help economists explain how decisions are made
positive incentive - ANSWER...-those that encourage action
i.e. end of year bonuses motivate employees to work hard throughout the year
negative incentive - ANSWER...-also encourages action
i.e. fear of receiving a speeding ticket keeps drivers from driving too fast
direct incentive - ANSWER...-easy to recognize.
i.e. "cut my grass and ill pay you $30"
i.e. taking roll and getting bonus points
indirect incentive - ANSWER...-harder to recognize.
policy is undertaken to achieve one thing then has the unattended affect to change the
behavior in other ways
, unintended consequence - ANSWER...-people who were supposed to use gov't
assistance as a safety net until they can find a job use it instead as a permanent source
of income
trade-offs - ANSWER...-second principle:
-involves a sacrifice that must be made to get a certain product or experience.
- i.e. b/t a clean environment and a higher level of income for its citizens
-whenever you do one thing you give up the opportunity doing something else
- decision maker chooses a course of action
opportunity cost - ANSWER...-third principle:
-a measure of the most valued thing that you could've been doing instead of what you're
doing
- the highest-valued alternative that must be sacrificed in order to get something else
- each time we make a choice we experience this or a lost chance to do something else
-i.e. getting paid to do something, like watch a movie and get paid for it
-i.e. deciding to go on a hike or a concert, when you wan to go to the concert
economic thinking - ANSWER...--systematically evaluating a course of action
- requires a purposeful evaluation of the available opportunities to make the best
decision possible
marginal analysis - ANSWER...-breaking down decisions into smaller parts
marginal thinking - ANSWER...-fourth principle:
requires decision-makers to evaluate whether the benefit of one more unit of something
is greater than its cost
markets - ANSWER...-bring buyers and sellers together to exchange goods and
services
trade - ANSWER...-fifth principle:
- voluntary exchange of goods and services b/t 2 or more parties
-where one individual, company, or country, exchanges something of value of one to
another
comparative advantage - ANSWER...-the situation where an individual, business, or
country can produce at a lower opportunity cost than a competitor can
scientific method steps (1-4): - ANSWER...-1. researchers observe a phenomenon that
interests them
2. develop a hypothesis
3. construct a model to test the hypothesis
4. design experiments to test how well the model works
positive statement - ANSWER...-can be tested and validated; it describes "what is"
scarcity - ANSWER...-the limited nature of society's resources.
theres not enough to go around, so if there isn't enough to go around you have to make
compromise
economics - ANSWER...-the study of how people allocate their limited resources to
satisfy their nearly unlimited wants. its the study of the choices that people make in all
different context
microeconomics - ANSWER...-study of the individual units that make up the economy
macroeconomics - ANSWER...-study of the overall aspects and workings of an
economy, such as inflation, growth, employment, interest rates, and the productivity of
the economy as a whole
1. incentives
2. trade-offs
3. opportunity cost
4. marginal thinking
5. trade - ANSWER...-5 foundations of economics
incentive - ANSWER...-first principle:
- factors that motivate you to act or to exert effort.
the engine of economic growth
- help economists explain how decisions are made
positive incentive - ANSWER...-those that encourage action
i.e. end of year bonuses motivate employees to work hard throughout the year
negative incentive - ANSWER...-also encourages action
i.e. fear of receiving a speeding ticket keeps drivers from driving too fast
direct incentive - ANSWER...-easy to recognize.
i.e. "cut my grass and ill pay you $30"
i.e. taking roll and getting bonus points
indirect incentive - ANSWER...-harder to recognize.
policy is undertaken to achieve one thing then has the unattended affect to change the
behavior in other ways
, unintended consequence - ANSWER...-people who were supposed to use gov't
assistance as a safety net until they can find a job use it instead as a permanent source
of income
trade-offs - ANSWER...-second principle:
-involves a sacrifice that must be made to get a certain product or experience.
- i.e. b/t a clean environment and a higher level of income for its citizens
-whenever you do one thing you give up the opportunity doing something else
- decision maker chooses a course of action
opportunity cost - ANSWER...-third principle:
-a measure of the most valued thing that you could've been doing instead of what you're
doing
- the highest-valued alternative that must be sacrificed in order to get something else
- each time we make a choice we experience this or a lost chance to do something else
-i.e. getting paid to do something, like watch a movie and get paid for it
-i.e. deciding to go on a hike or a concert, when you wan to go to the concert
economic thinking - ANSWER...--systematically evaluating a course of action
- requires a purposeful evaluation of the available opportunities to make the best
decision possible
marginal analysis - ANSWER...-breaking down decisions into smaller parts
marginal thinking - ANSWER...-fourth principle:
requires decision-makers to evaluate whether the benefit of one more unit of something
is greater than its cost
markets - ANSWER...-bring buyers and sellers together to exchange goods and
services
trade - ANSWER...-fifth principle:
- voluntary exchange of goods and services b/t 2 or more parties
-where one individual, company, or country, exchanges something of value of one to
another
comparative advantage - ANSWER...-the situation where an individual, business, or
country can produce at a lower opportunity cost than a competitor can
scientific method steps (1-4): - ANSWER...-1. researchers observe a phenomenon that
interests them
2. develop a hypothesis
3. construct a model to test the hypothesis
4. design experiments to test how well the model works
positive statement - ANSWER...-can be tested and validated; it describes "what is"
