Final Exam Review- Chapters 1-5

Front

Economics is the study of how people

Back

choose from limited resources to meet their wants and needs.

Answer explanation

Economics studies how people deal with the issue of scarcity.

Front

We all want more stuff than we have the resources to get. This concept is called

Back

Scarcity

Answer explanation

Scarcity deals with the fact that there's a permanent lack of all the resources that people need to meet all their needs and wants.

Front

Who's the "Father of Economics"?

Back

Adam Smith

Answer explanation

Adam Smith was a Scottish philosopher who wrote "The Wealth of Nations" and popularized economics around the American Revolution.

Front

The more we have of something, the less satisfaction we get from it. This is called what?

Back

The Law of Diminishing Marginal Utility

Answer explanation

Think of the sixth slice of pizza vs. the first.

Front

When a family decides to move to a different apartment, what type of economics is involved?

Back

Microeconomics

Answer explanation

This is a family's decision. Decisions for individuals, businesses, and families are microeconomic decisions.

Front

When the government decides what income tax rate to assign to wealthy Americans, what type of economics is involved?

Back

Macroeconomics

Answer explanation

Macroeconomics involves the decisions that affect everyone within a particular system.

Front

When people make choices, they give up something. The thing they give up is called what?

Back

Opportunity Cost

Answer explanation

Opportunity cost is your second best option- the thing you give up when making a choice.

Front

What type of economic system do we use in America?

Back

Mixed Economy

Answer explanation

All economic systems today are really some form of mixed economies. America's system is primarily a market economy with some government involvement- "a mixed market economy".

Front

What was the original economic system (once used everywhere)?

Back

Traditional

Answer explanation

Think hunting & gathering, fishing, and farming- subsistence living

Front

If the government is answering all three economic questions, what type of economic system are people there using?

Back

Command

Answer explanation

In a command economy, the government makes all economic decisions.