Principles of Macroeconomics (ECO 201) Chp. 1-4 Questions and Answers 100% Pass

Principles of Macroeconomics (ECO 201) Chp. 1-4 Questions and Answers 100% Pass Economics - Science of Scarcity (how individuals and societies deal with the fact that wants are greater than the limited resources available to satisfy those wants) Goods - Give a person utility Bads - Give a person disutility C E L L - Capital (goods used to produced other goods) Entrepreneurship (risk takers and organizers) Land (natural resources) Labor (physical and mental strength and talent) Scarcity - Wants are greater than the limited resources available to satisfy them EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 2 Scarcity affects.... - All individuals and societies Rationing Devices - $, time, brute force Effects of scarcity... - 1. need to make choices 2. need for a rationing device 3. competition Competition occurs... - Because of scarcity and takes the form of people trying to get more of the rationing device Opportunity cost - Highest alternative given up when a choice is made Higher opportunity cost - Less likely it will be done Decisions making at the margin (additional value) - Weighing additional benefits of a change against the additional costs of a change with respect to current conditions Efficiency - Marginal benefits equal to marginal costs Incentives - Something that encourages or motivates a person to undertake an action (benefits>costs) Unintended Effects - Examples: pollution, spillover costs Exchange - Process of giving one thing up for something else to make oneself better off EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 3 Market and Gov't - 1. identified/defined/described 2. identify cause of problem 3. propose solutions Ceteris Paribus - All other things held constant, nothing changes Theory - Abstract representation of the world