AGBM 101 EXAM 1 UPDATED QUESTIONS AND
ANSWERS
economic system - CORRECT ANSWER✅✅✅a particular set of institutional arrangements and a
coordinating mechanism- to respond to the economizing problem
laissez faire - CORRECT ANSWER✅✅✅the government's role would be limited to protecting private
property from theft and aggression and establishing a legal environment in which contracts would be
enforced and people could interact in market to buy and sell goods, services and resources
command system - CORRECT ANSWER✅✅✅government owns most property resources nd
economic decision making is set by a central economic plan created and enforced by the government;
socialism/capitalism
market system - CORRECT ANSWER✅✅✅capitalism/mixed economy
private property - CORRECT ANSWER✅✅✅enables individuals and businesses to obtain, use, and
dispose of property resources they see fit
self-interest - CORRECT ANSWER✅✅✅the motivating force of the various economic units as they
express their free choices
competition - CORRECT ANSWER✅✅✅requires two or more buyers and two or more sellers acting
independently in a particular product or resource market; freedom of sellers and buyers to enter or
leave markets, on the basis of their economic self-interest
specialization - CORRECT ANSWER✅✅✅using the resources an individual, firm, region, or nation to
produce one or a few goods or services rather than the entire range of goods and services
division of labor - CORRECT ANSWER✅✅✅specialization makes use of differences in ability;
specialization fosters learning by doing; specialization saves time
, product market - CORRECT ANSWER✅✅✅the place where goods and services produced by
businesses are bought and sold
resource market - CORRECT ANSWER✅✅✅households sell resources to businesses
demand - CORRECT ANSWER✅✅✅schedule or a curve that shows the various amounts of a product
that consumers are willing and able to purchase at each of a series of posible prices during a specified
period of time
law of demand - CORRECT ANSWER✅✅✅price falls, quantity rises; prices rises, quantity falls;
negative or inverse relationship between processes and quantity demanded
income effect - CORRECT ANSWER✅✅✅a lower price increases the purchasing power of a buyer's
money income, enabling the buyer to purchase more of the product than before
substitution effect - CORRECT ANSWER✅✅✅a lower price buyers have the incentive to substitute
what is now a less expensive product for other products that are now relatively more expensive
demand curve - CORRECT ANSWER✅✅✅smooth curve; downward slope; people buy more of a
product, service, or resource as its price falls; inverse/negative slope
determinants of demand - CORRECT ANSWER✅✅✅consumers tastes (preferences), the number of
buyers in the market, consumers' incomes, the prices of related goods, consumer expectations
substitute good - CORRECT ANSWER✅✅✅a good that can be used in place of another good
complementary good - CORRECT ANSWER✅✅✅good that is used with another good
independent good - CORRECT ANSWER✅✅✅goods that are not related to one another
ANSWERS
economic system - CORRECT ANSWER✅✅✅a particular set of institutional arrangements and a
coordinating mechanism- to respond to the economizing problem
laissez faire - CORRECT ANSWER✅✅✅the government's role would be limited to protecting private
property from theft and aggression and establishing a legal environment in which contracts would be
enforced and people could interact in market to buy and sell goods, services and resources
command system - CORRECT ANSWER✅✅✅government owns most property resources nd
economic decision making is set by a central economic plan created and enforced by the government;
socialism/capitalism
market system - CORRECT ANSWER✅✅✅capitalism/mixed economy
private property - CORRECT ANSWER✅✅✅enables individuals and businesses to obtain, use, and
dispose of property resources they see fit
self-interest - CORRECT ANSWER✅✅✅the motivating force of the various economic units as they
express their free choices
competition - CORRECT ANSWER✅✅✅requires two or more buyers and two or more sellers acting
independently in a particular product or resource market; freedom of sellers and buyers to enter or
leave markets, on the basis of their economic self-interest
specialization - CORRECT ANSWER✅✅✅using the resources an individual, firm, region, or nation to
produce one or a few goods or services rather than the entire range of goods and services
division of labor - CORRECT ANSWER✅✅✅specialization makes use of differences in ability;
specialization fosters learning by doing; specialization saves time
, product market - CORRECT ANSWER✅✅✅the place where goods and services produced by
businesses are bought and sold
resource market - CORRECT ANSWER✅✅✅households sell resources to businesses
demand - CORRECT ANSWER✅✅✅schedule or a curve that shows the various amounts of a product
that consumers are willing and able to purchase at each of a series of posible prices during a specified
period of time
law of demand - CORRECT ANSWER✅✅✅price falls, quantity rises; prices rises, quantity falls;
negative or inverse relationship between processes and quantity demanded
income effect - CORRECT ANSWER✅✅✅a lower price increases the purchasing power of a buyer's
money income, enabling the buyer to purchase more of the product than before
substitution effect - CORRECT ANSWER✅✅✅a lower price buyers have the incentive to substitute
what is now a less expensive product for other products that are now relatively more expensive
demand curve - CORRECT ANSWER✅✅✅smooth curve; downward slope; people buy more of a
product, service, or resource as its price falls; inverse/negative slope
determinants of demand - CORRECT ANSWER✅✅✅consumers tastes (preferences), the number of
buyers in the market, consumers' incomes, the prices of related goods, consumer expectations
substitute good - CORRECT ANSWER✅✅✅a good that can be used in place of another good
complementary good - CORRECT ANSWER✅✅✅good that is used with another good
independent good - CORRECT ANSWER✅✅✅goods that are not related to one another
