Econ-102-PSU-Exam
Economics - ANSWER study of how people and societies use limited resources to
satisfy unlimited wants; the management of scarcity and choice
Resources - ANSWER 1. Land: anything provided by nature
2. Labor: Mental and physical efforts of humans
3. Capitol: anything that is provided which in turn is used to produce other goods and
services
Microeconomics - ANSWER The study of decision making undertaken by individual
economic agents (households, firms)
Macroeconomics - ANSWER The study of the economy as a whole
3 main economic questions - ANSWER What will we produce? how will we produce?
who gets it?
How to answer 3 basic economic questions - ANSWER 1. Command Economy:
control authority ex. Queen
2. Market Economy: buyers and sellers come together
3. Mixed Economy: has elements of both 1 and 2
Ceteris Paribus - ANSWER "Other things being equal"
post hoc ergos propter hoc - ANSWER "before this therefore because of this"
Fallacy of composition - ANSWER Arguing, without additional support, that what is
true of the part is automatically true of the whole
Positive economics - ANSWER The study of "what is" in economics.
Normative economics - ANSWER makes prescriptions about the way the economy
should work
Opportunity Cost - ANSWER The value of the next best alternative that must be
forgone as a result of a decision
Production Possibility Curve - ANSWER representation of the possible ways an
economy could use resources
-downward sloping
-bowed out
Law of Increasing marginal opportunity cost - ANSWER as a produce produces more
of a good, the marginal cost rises
, Points inside the PPC - ANSWER Points inside the curve are inefficient and indicate
an economy is not utilizing all resources or resources are not used in the least-cost
manner
Points outside the PPC - ANSWER Impossible with the economy's resources
Shifts in the Production Possibility Curve - ANSWER -Change in the amount of
resources
-Changes in technology
Absolute Advantage - ANSWER A country or individual has an absolute advantage
in the production of a good when the country can produce the good using fewer
resources than another country or individual.
Quantity Demand - ANSWER the amount of a particular good that buyers will
purchase at a given price during a specified period at a specific price
Demand Schedule - ANSWER a table that shows the relationship between the price
of a good and the quantity demanded
Demand Curve - ANSWER downward-sloping line that graphically shows the
quantities demanded at each possible price
Law of Demand - ANSWER A law stating that there is a negative causal relationship
between the price of a good and quantity demand of the good, over a particular time.
Change in Quantity Demand - ANSWER movement along the demand curve that
shows a change in the quantity of the product purchased in response to a change in
price.
Change in Demand - ANSWER a shift of the entire demand curve
What causes a change in Demand - ANSWER 1. Change in preferences
2. Change in income
-normal goods: increase in income-increase in demand
-inferior goods: increase in income-decrease in demand
3. Change in the Price of Related goods
-Complements: increase in price of 1-decrease in demand of other
-Substitute: increase in price of 1-increase in demand of other
4. Change in expectations
5. Changes in the number of consumers in the market
6. Government Policies
7. Advertising
Market Demand - ANSWER the total demand of all consumers for a product or
service
Firms - ANSWER institutions that organize the production of goods and services
Economics - ANSWER study of how people and societies use limited resources to
satisfy unlimited wants; the management of scarcity and choice
Resources - ANSWER 1. Land: anything provided by nature
2. Labor: Mental and physical efforts of humans
3. Capitol: anything that is provided which in turn is used to produce other goods and
services
Microeconomics - ANSWER The study of decision making undertaken by individual
economic agents (households, firms)
Macroeconomics - ANSWER The study of the economy as a whole
3 main economic questions - ANSWER What will we produce? how will we produce?
who gets it?
How to answer 3 basic economic questions - ANSWER 1. Command Economy:
control authority ex. Queen
2. Market Economy: buyers and sellers come together
3. Mixed Economy: has elements of both 1 and 2
Ceteris Paribus - ANSWER "Other things being equal"
post hoc ergos propter hoc - ANSWER "before this therefore because of this"
Fallacy of composition - ANSWER Arguing, without additional support, that what is
true of the part is automatically true of the whole
Positive economics - ANSWER The study of "what is" in economics.
Normative economics - ANSWER makes prescriptions about the way the economy
should work
Opportunity Cost - ANSWER The value of the next best alternative that must be
forgone as a result of a decision
Production Possibility Curve - ANSWER representation of the possible ways an
economy could use resources
-downward sloping
-bowed out
Law of Increasing marginal opportunity cost - ANSWER as a produce produces more
of a good, the marginal cost rises
, Points inside the PPC - ANSWER Points inside the curve are inefficient and indicate
an economy is not utilizing all resources or resources are not used in the least-cost
manner
Points outside the PPC - ANSWER Impossible with the economy's resources
Shifts in the Production Possibility Curve - ANSWER -Change in the amount of
resources
-Changes in technology
Absolute Advantage - ANSWER A country or individual has an absolute advantage
in the production of a good when the country can produce the good using fewer
resources than another country or individual.
Quantity Demand - ANSWER the amount of a particular good that buyers will
purchase at a given price during a specified period at a specific price
Demand Schedule - ANSWER a table that shows the relationship between the price
of a good and the quantity demanded
Demand Curve - ANSWER downward-sloping line that graphically shows the
quantities demanded at each possible price
Law of Demand - ANSWER A law stating that there is a negative causal relationship
between the price of a good and quantity demand of the good, over a particular time.
Change in Quantity Demand - ANSWER movement along the demand curve that
shows a change in the quantity of the product purchased in response to a change in
price.
Change in Demand - ANSWER a shift of the entire demand curve
What causes a change in Demand - ANSWER 1. Change in preferences
2. Change in income
-normal goods: increase in income-increase in demand
-inferior goods: increase in income-decrease in demand
3. Change in the Price of Related goods
-Complements: increase in price of 1-decrease in demand of other
-Substitute: increase in price of 1-increase in demand of other
4. Change in expectations
5. Changes in the number of consumers in the market
6. Government Policies
7. Advertising
Market Demand - ANSWER the total demand of all consumers for a product or
service
Firms - ANSWER institutions that organize the production of goods and services
