Economics 1

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economics can be best defined by the social science concerned with the efficient use of scarce resources to achieve maximum satisfaction of economic wants
opportunity costs may be defined as the the amount of one product that must be given up to produce one or more unit of another product
production possibilities curve shows the maximum amounts of two goods that can be produced assuming the full and efficient use of available resources
which of the following will not produce an outward shift of the production possibilities curve? the reduction of unemployment or the inefficient use of resources
the market mechanism can be defined as the use of market prices to signal desired output
two kinds of markets found in the circular flow model are product and factor markets
the gdp the market value of all final goods and services produced within a nation in a specific year
Adam Smith wrote The Wealth Of nations, which described the virtues of market based economies
the factors of production are land labor capital and entrepreneurship
an economy that uses the market signals and government directives to allocate resources and coordinate economic activity is characteristic of a mixed economy
according to the law of demand, the quantity of a good demanded in a given time period decreases as its price rises
a change in demand means there has been a shift in the demand curve and a change in the quantity demanded corresponds to a movement along the demand curve
a decrease in the price of one good can cause an increase in the demand for another good if the goods are complements
a market is said to be in equilibrium when the quantity demanded equals the quantity supplied
a shortage of a product will arise when price is below equilibrium with the result that quantity demanded exceeds quantity supplied
what can cause a decrease in consumer demand for product x? a decrease in consumer income
when the production or consumption of a good of a good involves an externality someone not involved in buying or selling the good is affected
transfer payments include social security benefits welfareunemployment benefits
two major virtues of the market system are that it allocates resources efficiently and allows economic freedom
in general income taxes tend to be progressive
in the market economy the distribution of income would be determined primarily by the quantities and qualities of the resources which households supply
one reason why the quantity of a good demanded increases when its price falls is that the lower price increases the real income of buyers enabling them to by more
the problems of aggregate inflation and unemployment are major topics of macro economics
a right ward shift of the market supply curve ceteris paribus causes equilibrium price to decrease and quantity to increase
which of the following can change without shifting either demand or supply ,ceteris paribus the price of the good itself
which factor will increase the demand for a product a favorable change in consumer taste
an increase in the supply of a product would most likely be caused by an increase in consumer income
the demand for a product might shift as the result of a change in consumer tastethe price of related goodsconsumer incomes
which of the following is a determinant of supply
taxes and subsidies
graphically the market demand curve is steeper than any individual demand curves compromising it
the law of supply states that the quantity of a good supplied ceteris paribus ,increases as its price increases
all economic systems must answer which of the following questions what to produce for whom to producehow to produce

the location of the supply curve of a product depends on the technology use to produce itthe prices of resources used in its productionthe number of sellers
a regressive tax is such that tax rates are higher the smaller ones income
specialization in production is important primarily because it results in greater total output

real GDP gdp data that has been adjusted for changes in the price level
the per capita GDP a measure of output divided by the total population
economists define investment as an increase in business inventories spending on plant and equipment and new construction
the law of diminishing marginal utility states that beyond some point additional units of a product will yield less and less extra satisfaction to a consumer
microeconomics is concerned with individual economic units and specific markets
price elasticity of a demand shows how quantity demanded responds to price changes

when demand is inelastic ceteris paribus an increase in price leads to greater revenue
a price cut will increase the total revenue a firm receives ceteris paribus only if the demand for its product is elastic
ceteris paribus as the number of substitutes for a good increases the price elasticity of demand should become larger
which of the following causes the demand to be more elastic in respect to price. longer periods of time to adjust to a change in pricei
if demand for a product is elastic the value of the price elasticity coefficient is greater than 1
the demand for gasoline is inelastic
in which of the following instances will total revenue decline price rises and demand is elastic
utility refers to the satisfaction that a consumer derives from a good or service
the law of diminishing marginal utility suggests that people are willing to buy additional quantities of a good only if its price falls
marginal utility is the change in total utility realized by consuming one or more unit of a goodd
productivity is output per unit of input
list the determinants of price elasticity necessities vs. luxuries-goods that are crucial to every day life( toothpaste, food, gas)luxuries-vacation, traveling, new car
availability of substitutes- if a price of a particular good increases, the consumer will look for other options at a cheaper price
price relative to income-if the price of a product exceeds an individuals income, then price changes will be important
list the determinants of demand tastes incomeother goodsexpectations number of buyers
determinants of supply
technology factor costtaxes and subsidies expectationsother goods number of sellers
a price cut reduces total revenue if demand is inelastic
a price cut does not change total revenue if demand is unitary elastic (E=1)
the major uses of total output include household consumption; business investment;government services;exports
price ceiling upper limit imposed on the price of a good or service
price ceiling have three predictable effects increase the quantity demanded; decrease the quantity supplied; create market shortage
price floor lower limit imposed on the price of a good
price floor has three predictable effects increases supply needed;decrease in demand;creates market surplus