ECON 2030 Exam 1 Notes Questions
With Verified Answers
Positive - ANSWER study of what is and how the economy works
a testable statement
descriptive
"It is a sunny day today"
we can test to see if they are t/f
Normative - ANSWER study of what the goals of the economics should be
based on value (good/bad)
not testable
opinion
"it is a NICE sunny day today"
Graphing - ANSWER a pictorial of a relationship b/w two things
Opportunity Cost Application: International Trade - ANSWER Questions: 1. if
worker's in the U.S. are the most productive in the world, why do we consume so
many imported goods? 2. if trade can make everyone better off, why is there so
much opposition to it?
Tool: Production Possibilities Frontier (PPF)
Efficiency - ANSWER getting the most out of our fine resources
Numerical Slope=Opportunity Cost - ANSWER what you have to give up to get
something
Economic growth - ANSWER at a point in time we are producing more goods and
services in a previous point in time
PPF - ANSWER the limited to what we are able to make; shows a given point in
time a country has a fine amount of resources/workers, and with those
resources can we produce a fine amount of goods and services
Demand - ANSWER the ability and willingness to purchase (buy a good or
service at various prices
Quantity Demanded - ANSWER specific amount that is willing and able to be
purchased of a good or service at a specific price
, reservation price - ANSWER max price you are willing to pay for a unit of the
good, what you think it is worth
price of good (-) - ANSWER the only determinant of the specific price or good,
link with reservation price
income - ANSWER normal good (+)
inferior good (-)
normal good (+) - ANSWER if income increases and everything is held constant
we demand more of goods
inferior good (-) - ANSWER if income decreases and everything is held constant
we demand less of goods and buy cheaper items
determinants of demand - ANSWER income, price of related goods, taste and
preferences, expectation, number of buyers
price of related goods - ANSWER substitues: increase price (+)
compliments: increase price (-)
substitues: increase price (+) - ANSWER goods consumed either/or, two goods
for which when the price of one increases everything held constant the demand
for the other increases, also cause the price of the sense demand to go up
compliments: increase price (-) - ANSWER goods that are consumed together
(and), if the price of one increases the demand for the other goes down, cause
the price of the other good to go down
tastes and preferences (+) - ANSWER ability and willingness to purchase goods
at the buyers wants; changes can affect the demand for a good w/o a change in
price
expectations - ANSWER what we think is going to happen in the future;
everything matters, how we perceive what happens in the future influences what
we do today; future price (+), future income: normal good (+) inferior good (-)
number of buyers (+) - ANSWER if the number increases, the demand for the
good increases
graphically - ANSWER change in quantity demanded: movement along curve,
change in demand: shift of entire curve
transaction - ANSWER act of buying and selling, we need both a buyer and a
seller
With Verified Answers
Positive - ANSWER study of what is and how the economy works
a testable statement
descriptive
"It is a sunny day today"
we can test to see if they are t/f
Normative - ANSWER study of what the goals of the economics should be
based on value (good/bad)
not testable
opinion
"it is a NICE sunny day today"
Graphing - ANSWER a pictorial of a relationship b/w two things
Opportunity Cost Application: International Trade - ANSWER Questions: 1. if
worker's in the U.S. are the most productive in the world, why do we consume so
many imported goods? 2. if trade can make everyone better off, why is there so
much opposition to it?
Tool: Production Possibilities Frontier (PPF)
Efficiency - ANSWER getting the most out of our fine resources
Numerical Slope=Opportunity Cost - ANSWER what you have to give up to get
something
Economic growth - ANSWER at a point in time we are producing more goods and
services in a previous point in time
PPF - ANSWER the limited to what we are able to make; shows a given point in
time a country has a fine amount of resources/workers, and with those
resources can we produce a fine amount of goods and services
Demand - ANSWER the ability and willingness to purchase (buy a good or
service at various prices
Quantity Demanded - ANSWER specific amount that is willing and able to be
purchased of a good or service at a specific price
, reservation price - ANSWER max price you are willing to pay for a unit of the
good, what you think it is worth
price of good (-) - ANSWER the only determinant of the specific price or good,
link with reservation price
income - ANSWER normal good (+)
inferior good (-)
normal good (+) - ANSWER if income increases and everything is held constant
we demand more of goods
inferior good (-) - ANSWER if income decreases and everything is held constant
we demand less of goods and buy cheaper items
determinants of demand - ANSWER income, price of related goods, taste and
preferences, expectation, number of buyers
price of related goods - ANSWER substitues: increase price (+)
compliments: increase price (-)
substitues: increase price (+) - ANSWER goods consumed either/or, two goods
for which when the price of one increases everything held constant the demand
for the other increases, also cause the price of the sense demand to go up
compliments: increase price (-) - ANSWER goods that are consumed together
(and), if the price of one increases the demand for the other goes down, cause
the price of the other good to go down
tastes and preferences (+) - ANSWER ability and willingness to purchase goods
at the buyers wants; changes can affect the demand for a good w/o a change in
price
expectations - ANSWER what we think is going to happen in the future;
everything matters, how we perceive what happens in the future influences what
we do today; future price (+), future income: normal good (+) inferior good (-)
number of buyers (+) - ANSWER if the number increases, the demand for the
good increases
graphically - ANSWER change in quantity demanded: movement along curve,
change in demand: shift of entire curve
transaction - ANSWER act of buying and selling, we need both a buyer and a
seller
