PSU - Econ 102 Final Exam UPDATED ACTUAL Questions And Correct Answers
Terms in this set (93)
Economics study of how people and societies use limited resources to satisfy unlimited
wants; the management of scarcity and choice
Resources 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 The study of decision making undertaken by individual economic agents
(households, firms)
Macroeconomics The study of the economy as a whole
3 main economic questions What will we produce? how will we produce? who gets it?
How to answer 3 basic economic questions 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 "Other things being equal"
post hoc ergos propter hoc "before this therefore because of this"
Fallacy of composition Arguing, without additional support, that what is true of the part is automatically
true of the whole
Positive economics The study of "what is" in economics.
Normative economics makes prescriptions about the way the economy should work
Opportunity Cost The value of the next best alternative that must be forgone as a result of a
decision
Production Possibility Curve representation of the possible ways an economy could use resources
-downward sloping
-bowed out
Law of Increasing marginal opportunity cost as a produce produces more of a good, the marginal cost rises
Points inside the PPC 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 Impossible with the economy's resources
, Shifts in the Production Possibility Curve -Change in the amount of resources
-Changes in technology
Absolute Advantage 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 the amount of a particular good that buyers will purchase at a given price during
a specified period at a specific price
Demand Schedule a table that shows the relationship between the price of a good and the quantity
demanded
Demand Curve downward-sloping line that graphically shows the quantities demanded at each
possible price
Law of Demand 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 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 a shift of the entire demand curve
What causes a change in Demand 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 the total demand of all consumers for a product or service
Firms institutions that organize the production of goods and services
Terms in this set (93)
Economics study of how people and societies use limited resources to satisfy unlimited
wants; the management of scarcity and choice
Resources 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 The study of decision making undertaken by individual economic agents
(households, firms)
Macroeconomics The study of the economy as a whole
3 main economic questions What will we produce? how will we produce? who gets it?
How to answer 3 basic economic questions 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 "Other things being equal"
post hoc ergos propter hoc "before this therefore because of this"
Fallacy of composition Arguing, without additional support, that what is true of the part is automatically
true of the whole
Positive economics The study of "what is" in economics.
Normative economics makes prescriptions about the way the economy should work
Opportunity Cost The value of the next best alternative that must be forgone as a result of a
decision
Production Possibility Curve representation of the possible ways an economy could use resources
-downward sloping
-bowed out
Law of Increasing marginal opportunity cost as a produce produces more of a good, the marginal cost rises
Points inside the PPC 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 Impossible with the economy's resources
, Shifts in the Production Possibility Curve -Change in the amount of resources
-Changes in technology
Absolute Advantage 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 the amount of a particular good that buyers will purchase at a given price during
a specified period at a specific price
Demand Schedule a table that shows the relationship between the price of a good and the quantity
demanded
Demand Curve downward-sloping line that graphically shows the quantities demanded at each
possible price
Law of Demand 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 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 a shift of the entire demand curve
What causes a change in Demand 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 the total demand of all consumers for a product or service
Firms institutions that organize the production of goods and services
