ECON 2100 QUESTIONS AND ANSWERS
market economy - Answer -an economy in which decisions about production and
consumption are made by individual producers
opportunity cost - Answer -The real cost of an item is its ______ ___: what you must
give up in order to get it.
marginal decisions - Answer -decisions to do more or less of an activity.
efficient - Answer -An economy is ______ if it takes all opportunities to make some
people better off without making other people worse off.
scarce - Answer -resources are _____
"other things equal" - Answer -The _____ assumption means that all other relevant
factors remain unchanged.
comparative advantage - Answer -A country has a _______ in producing a good or
service if the opportunity cost of producing the good is lower for that country than for
another country.
absolute advantage - Answer -A country has an _______ in an activity if the country
can make more output per worker than another country.
circular-flow diagram - Answer -a model that represents the transactions in an economy
by flows around a circle.
Positive economics - Answer -is the branch of economic analysis that describes the
way the economy actually works
Normative economics - Answer -makes prescriptions about the way the economy
should work.
competitive - Answer -In a ______ market:
1.There are many buyers and sellers. 2.Sellers offer the same good or service
(homogenious) 3.No individual's actions have a noticeable effect on the price at which
the good or service is sold. 4.In other words: no one party can influence price. All sellers
and buyers are price takers.
demand - Answer -A ______ curve is the graphical representation of the demand
schedule
Law of Demand - Answer -The higher the price for a good, other things equal, the
smaller the quantities of that good are demanded
, substitutes - Answer -Two goods are ______ if a fall in the price of one of the goods
makes consumers less willing to buy the other good.
complements - Answer -Two goods are______ if a fall in the price of one good makes
people more willing to buy the other good.
Normal good - Answer -When a rise in income increases the demand for a good
Inferior good - Answer -When a rise in income decreases the demand for a good
supply curve - Answer -the graphical representation of the supply schedule
Law of Supply - Answer -A higher price for a good, other things equal, the greater the
quantity of that good is produced.
demand schedule - Answer -shows how much of a good or service consumers will want
to buy at different prices.
supply schedule - Answer -shows how much of a good or service would be supplied at
different prices
input - Answer -a good that is used to produce another good.
equilibrium - Answer -______ in a competitive market occurs when quantity demanded
= quantity supplied
Surplus - Answer -______ of a good is when quantity supplied > quantity demanded
Shortage - Answer -______ of a good is when quantity demanded > quantity supplied
inelastic; vertical - Answer -Demand is perfectly ____ when the quantity demanded
does not respond at all to changes in the price. The demand curve is a _____ line
elastic; horizontal - Answer -Demand is perfectly____ when any price increase will
cause the quantity demanded to drop to zero. The demand curve is a _____ line
elastic - Answer -Demand is _____ if the price elasticity of demand is greater than 1
inelastic - Answer -Demand is _____ if the price elasticity of demand is less than 1
unit-elastic - Answer -Demand is _____ if the price elasticity of demand is exactly 1
A price effect - Answer -After a price increase, each unit sold sells at a higher price,
which tends to raise revenue.
market economy - Answer -an economy in which decisions about production and
consumption are made by individual producers
opportunity cost - Answer -The real cost of an item is its ______ ___: what you must
give up in order to get it.
marginal decisions - Answer -decisions to do more or less of an activity.
efficient - Answer -An economy is ______ if it takes all opportunities to make some
people better off without making other people worse off.
scarce - Answer -resources are _____
"other things equal" - Answer -The _____ assumption means that all other relevant
factors remain unchanged.
comparative advantage - Answer -A country has a _______ in producing a good or
service if the opportunity cost of producing the good is lower for that country than for
another country.
absolute advantage - Answer -A country has an _______ in an activity if the country
can make more output per worker than another country.
circular-flow diagram - Answer -a model that represents the transactions in an economy
by flows around a circle.
Positive economics - Answer -is the branch of economic analysis that describes the
way the economy actually works
Normative economics - Answer -makes prescriptions about the way the economy
should work.
competitive - Answer -In a ______ market:
1.There are many buyers and sellers. 2.Sellers offer the same good or service
(homogenious) 3.No individual's actions have a noticeable effect on the price at which
the good or service is sold. 4.In other words: no one party can influence price. All sellers
and buyers are price takers.
demand - Answer -A ______ curve is the graphical representation of the demand
schedule
Law of Demand - Answer -The higher the price for a good, other things equal, the
smaller the quantities of that good are demanded
, substitutes - Answer -Two goods are ______ if a fall in the price of one of the goods
makes consumers less willing to buy the other good.
complements - Answer -Two goods are______ if a fall in the price of one good makes
people more willing to buy the other good.
Normal good - Answer -When a rise in income increases the demand for a good
Inferior good - Answer -When a rise in income decreases the demand for a good
supply curve - Answer -the graphical representation of the supply schedule
Law of Supply - Answer -A higher price for a good, other things equal, the greater the
quantity of that good is produced.
demand schedule - Answer -shows how much of a good or service consumers will want
to buy at different prices.
supply schedule - Answer -shows how much of a good or service would be supplied at
different prices
input - Answer -a good that is used to produce another good.
equilibrium - Answer -______ in a competitive market occurs when quantity demanded
= quantity supplied
Surplus - Answer -______ of a good is when quantity supplied > quantity demanded
Shortage - Answer -______ of a good is when quantity demanded > quantity supplied
inelastic; vertical - Answer -Demand is perfectly ____ when the quantity demanded
does not respond at all to changes in the price. The demand curve is a _____ line
elastic; horizontal - Answer -Demand is perfectly____ when any price increase will
cause the quantity demanded to drop to zero. The demand curve is a _____ line
elastic - Answer -Demand is _____ if the price elasticity of demand is greater than 1
inelastic - Answer -Demand is _____ if the price elasticity of demand is less than 1
unit-elastic - Answer -Demand is _____ if the price elasticity of demand is exactly 1
A price effect - Answer -After a price increase, each unit sold sells at a higher price,
which tends to raise revenue.
