ECON 104 Exam guide
Exam Breakdown – Real Paper with Full Guide
transaction costs - the costs of time and information required to carry out a market exchange
Economics - The study of how people use their scarce resources to satisfy their unlimited wants
Resources - The inputs, or factors of production, used to produce the goods and services that
people want
4 Main Resources - Labor, natural resources, capital, entrepreneurial ability
Capital - The inputs, or factors of production, used to produce the goods and services that
people want
Natural Resource - All gifts of nature used to produce goods and services; includes renewable
and exhaustible resources
Wages - Payment to resource owners for their labor
interest - Payment to resource owners for the use of their capital
Rent - Payment to resource owners for the use of natural resources
Profit - reward for entrepreneurial ability; sales revenue minus resource cost
Good - A tangible product used to satisfy human wants
, service - Any activity that fulfills a human want or need and returns money to those who
provide it.
Scarcity - occurs when the amount people desire exceeds the amount available at a zero price
Product Market - market where goods and services are bought and sold
Resource Market - market where resources are bought and sold
rational self-interest - each individual tries to maximize the expected benefit achieved with a
given cost or to minimize the expected cost of achieving a given benefit
Marginal - additional, Incremental, extra
Economic Fluctuations - the rise and fall of economic activity relative to the long-term growth
trend of the economy; also called business cycles
economic theory - a simplification of economic reality used to make predictions about the real
world
economic model - a simplification of reality used to make predictions about cause and effect in
the real world
variable - a measure, such as price or quantity, that can take on different values at different
times
other-things-constant assumption - The assumption, when focusing on the relation among key
economic variables, that other variables remain unchanged; in Latin, ceteris paribus
Exam Breakdown – Real Paper with Full Guide
transaction costs - the costs of time and information required to carry out a market exchange
Economics - The study of how people use their scarce resources to satisfy their unlimited wants
Resources - The inputs, or factors of production, used to produce the goods and services that
people want
4 Main Resources - Labor, natural resources, capital, entrepreneurial ability
Capital - The inputs, or factors of production, used to produce the goods and services that
people want
Natural Resource - All gifts of nature used to produce goods and services; includes renewable
and exhaustible resources
Wages - Payment to resource owners for their labor
interest - Payment to resource owners for the use of their capital
Rent - Payment to resource owners for the use of natural resources
Profit - reward for entrepreneurial ability; sales revenue minus resource cost
Good - A tangible product used to satisfy human wants
, service - Any activity that fulfills a human want or need and returns money to those who
provide it.
Scarcity - occurs when the amount people desire exceeds the amount available at a zero price
Product Market - market where goods and services are bought and sold
Resource Market - market where resources are bought and sold
rational self-interest - each individual tries to maximize the expected benefit achieved with a
given cost or to minimize the expected cost of achieving a given benefit
Marginal - additional, Incremental, extra
Economic Fluctuations - the rise and fall of economic activity relative to the long-term growth
trend of the economy; also called business cycles
economic theory - a simplification of economic reality used to make predictions about the real
world
economic model - a simplification of reality used to make predictions about cause and effect in
the real world
variable - a measure, such as price or quantity, that can take on different values at different
times
other-things-constant assumption - The assumption, when focusing on the relation among key
economic variables, that other variables remain unchanged; in Latin, ceteris paribus
