Microeconomics Definitions –Questions and Answers Graded A+

Microeconomics Definitions –Questions and Answers Graded A+ Microeconomics - ANSWER-The study of the behaviour (supply and demand) of individual markets Scarcity - ANSWER-A situation in which unlimited wants exceed the limited resources available to fulfill those wants Factors of production - ANSWER-All the economic resources (input) necessary to produce a society's goods and services, such as land, labour, capital and entrepreneurship Ceteris paribus - ANSWER-All things being equal - one of the assumptions used in many economic models, where an individual factor is changed while all others are held constant Opportunity cost - ANSWER-Cost of the next best alternative use of money, time, or resources when one choice is made rather than another Economic good - ANSWER-A good or service that is limited in supply, therefore it is scarce and has an opportunity cost Free good - ANSWER-Commodities that have no price and no opportunity cost eg. fresh air and sunshine Public sector - ANSWER-The part of the economy where goods and services are provided by the government, i.e. public hospitals, roads, schools, parks and gardens. Private sector - ANSWER-The part of the economy that is characterized by private ownership of the means of production by profit seeking individuals Production possiblity curve - ANSWER-A graph that shows the different rates of production of two goods that an individual or group can efficiently produce with limited productive and fully employed resources within a specified time with Free market economy - ANSWER-An economy where all economic decisions are taken by individual households and firms, with no government intervention Mixed economy - ANSWER-An economy in which private enterprise exists in combination with a considerable amount of government regulation and promotion Sustainable development or Sustainability - ANSWER-Development that meets the needs of the present without compromising the ability of future generations to meet their own needs Economic growth - ANSWER-A steady growth in the productive capacity of the economy (and so a growth of national income), therefore growth in GDP Economic development - ANSWER-The improvement of living standards by economic growth. Common market - ANSWER-A customs union with common policies on product regulation, and free movement of goods, services, capital and labour