Econ 1501 Global Economic Issues
Study Guide questions with solutions
Economics - answersThe study of how people seek to satisfy their needs and wants by
making choices
opportunity cost - answersthe most desirable alternative given up as the result of a
decision
production possibilites frontier (PPF) - answersa graph that shows the combinations of
output that the economy can possibly produce given the available factors of production
and the available production technology
shape of PPF when people have different skills - answersbowed outward, increasing
opportunity cost
Shape of PPF when people have the same skills - answersstraight line, constant
opportunity cost
economic growth - answersthe ability of the economy to increase the production of
goods and services
generalized growth - answersan increase in, or an increase in the ability of, resources to
produce all goods
sources of economic growth - answersresources, technology, and institutions
circular flow model - answersA diagram that traces the flow of resources, products,
income, and revenue among economic decision makers
---Households are the buyers in the goods and services market
---Households are the sellers in the factor of input market
---Firms are the buyers in the factor of input market
---Firms are the sellers in the goods and services marke
Marginal benefit - answersthe additional benefit to a consumer from consuming one
more unit of a good or service
marginal cost - answersthe cost of producing one more unit of a good
positive analysis - answersanalysis concerned with what is
, normative analysis - answersanalysis concerned with what ought to be
incentive - answersa positive or negative environmental stimulus that motivates
behavior
correlation - answersA measure of the extent to which two factors vary together, and
thus of how well either factor predicts the other.
causation - answersA cause and effect relationship in which one variable controls the
changes in another variable.
fallacy of composition - answersthe incorrect belief that what is true for the individual, or
part, must necessarily be true for the group, or the whole
market - answersa group of buyers and sellers of a particular good or service
demand schedule - answersa table that shows the relationship between the price of a
good and the quantity demanded
quantity demanded - answersthe amount of a good that buyers are willing and able to
purchase
demand - answersConsumer willingness and ability to buy products
law of demand - answersconsumers buy more of a good when its price decreases and
less when its price increases
Determinants of Demand - answersFactors other than price that determine the
quantities demanded of a good or service
normal good - answersa good that consumers demand more of when their incomes
increase
inferior good - answersa good that consumers demand less of when their incomes
increase
substitute - answersa product or service that can be easily replaced with another by
consumers
complement - answersa good whose use is related to the use of an associated or paired
good
supply schedule - answersa table that shows the relationship between the price of a
good and the quantity supplied
quantity supplied - answersthe amount of a good that sellers are willing and able to sell
Study Guide questions with solutions
Economics - answersThe study of how people seek to satisfy their needs and wants by
making choices
opportunity cost - answersthe most desirable alternative given up as the result of a
decision
production possibilites frontier (PPF) - answersa graph that shows the combinations of
output that the economy can possibly produce given the available factors of production
and the available production technology
shape of PPF when people have different skills - answersbowed outward, increasing
opportunity cost
Shape of PPF when people have the same skills - answersstraight line, constant
opportunity cost
economic growth - answersthe ability of the economy to increase the production of
goods and services
generalized growth - answersan increase in, or an increase in the ability of, resources to
produce all goods
sources of economic growth - answersresources, technology, and institutions
circular flow model - answersA diagram that traces the flow of resources, products,
income, and revenue among economic decision makers
---Households are the buyers in the goods and services market
---Households are the sellers in the factor of input market
---Firms are the buyers in the factor of input market
---Firms are the sellers in the goods and services marke
Marginal benefit - answersthe additional benefit to a consumer from consuming one
more unit of a good or service
marginal cost - answersthe cost of producing one more unit of a good
positive analysis - answersanalysis concerned with what is
, normative analysis - answersanalysis concerned with what ought to be
incentive - answersa positive or negative environmental stimulus that motivates
behavior
correlation - answersA measure of the extent to which two factors vary together, and
thus of how well either factor predicts the other.
causation - answersA cause and effect relationship in which one variable controls the
changes in another variable.
fallacy of composition - answersthe incorrect belief that what is true for the individual, or
part, must necessarily be true for the group, or the whole
market - answersa group of buyers and sellers of a particular good or service
demand schedule - answersa table that shows the relationship between the price of a
good and the quantity demanded
quantity demanded - answersthe amount of a good that buyers are willing and able to
purchase
demand - answersConsumer willingness and ability to buy products
law of demand - answersconsumers buy more of a good when its price decreases and
less when its price increases
Determinants of Demand - answersFactors other than price that determine the
quantities demanded of a good or service
normal good - answersa good that consumers demand more of when their incomes
increase
inferior good - answersa good that consumers demand less of when their incomes
increase
substitute - answersa product or service that can be easily replaced with another by
consumers
complement - answersa good whose use is related to the use of an associated or paired
good
supply schedule - answersa table that shows the relationship between the price of a
good and the quantity supplied
quantity supplied - answersthe amount of a good that sellers are willing and able to sell
