Final Exam Study Guide ECON 101 - Study Answer Collection

Final Exam Study Guide ECON 101 - Study Answer Collection what is economics? - answer - study of how a society manages its scarce resourses resources - answer - input, factors of production economy's resources - answer - 1. labor 2. capital 3. natural resources 4. entrepreneurial ability labor - answer - physical capital (machines, buildings, roads) capital - answer - human capital (education, knowledge) scarcity - answer - nobody can have everything they want macroeconomics - answer - how to utilize these resources to better the nation as a whole the Decision Makers - answer - 1. households 2. government 3. firms 4. rest of the world households - answer - the demand goods/services, supply resources firms & goverment - answer - demand resources, supply goods/services market - answer - any place where supply and demand come together Production Possibility Curve/Frontier - answer - graph showing various combos of output that economy can produce given its resources & tech opportunity cost - answer - what you give up to get a specific item demand - answer - how much of a good customers are able/willing to purchase at all possible prices quantity of demand - answer - how much of a good customers are able and willing to purchase at a particular price (point on demand curve) law of demand - answer - Cetirus peribus: as prices go up, quantity of demand goes down (holding everything else constant) movement on the demand/supply curve - answer - change in quantity of demand due to change in price shift on the demand curve - answer - when entire curve shifts right or left, its due to a change in demand. it is also effected by # of buyers, substitutes, and income Changes due to Income - answer - Normal Goods: as income goes up, demand goes up (manicures) Inferior Goods: as income goes up, demand goes down (bus rides) Changes due to Price of Related Goods - answer - Subsitutes: as the price of Coke goes up, the demand goes up for Pepsi Compliments: as the price for beer goes up, demand for nachos goes down supply - answer - amount of a good sellers are able & willing to supply at all possible prices quantity of supply - answer - amount of a good sellers are able & willing to sell at a particular price law of supply - answer - cetirus peribus: as price of good increases, quantity of supply decreases shift in supply - answer - when the entire demand curve shifts due to change in factors that effect supply OTHER than price factors causing shift in supply - answer - # sellers, change in tech, natural disasters, gov't regulations, change in resources surplus - answer - where quantity of supply is greater than quantity of demand. prices decrease until equilibrium shortage - answer - where quantity of demand is greater than quantity of supply. prices increase until equilibrium gross domestic product - answer - measure of nations output; its the total market value of all final goods and services produced during a specific time period in a country nominal GDP - answer - values goods/services at CURRENT prices NGDP2012 = P2012(Q2012)/total units + P2012(Q2012)/total units real GDP - answer - values goods/services at CONSTANT prices. choose a base year. RGDP2012 = Q2012(P2010) RGDP2011 = Q2011(P2010) gross national product - answer - market value of all final goods/services produced during a given time by a nation's residents economic growth - answer - percent change in RGDP from previous time period. EG = ([GDP2012 -GDP2011]/GDP2011) x10 expenditure approach - answer - method of computing GDP: calculation of production value from spending y = C + I +G +NX (y= RGDP, C= consumer spending, I = investment spending, G= gov't spending, NX = net exports) value added approach - answer - the increase in market value of a product that takes place at each stage of production GDP Deflator - answer - price index: shows rise in NGDP that is attributed to a rise in price rather than in quantity produced GDP