Final Exam Practice

What is economics?

• The study of how individuals and societies satisfy their unlimited wants with limited resources

• The way in which a society uses its scarce resources to satisfy its people’s unlimited wants

• A situation that exists when there are not enough resources to meet human wants

• The economic resources needed to produce goods and services

What is scarcity?

• The study of how individuals and societies satisfy their unlimited wants with limited resources

• The way in which a society uses its scarce resources to satisfy its people’s unlimited wants

• A situation that exists when there are not enough resources to meet human wants

• The economic resources needed to produce goods and services

What are the factors of production

• Land, labor, capital, entrepreneurship

• Traditional, command, market, mixed

• Physical capital, human capital, effort, skills

• Manufacturers, businesses, government, economic system

What is Microeconomics?

• The study of individuals, families, and businesses; Topics: prices, costs, profits, competition, and behavior of consumers and producers

• The study of the economy as a whole and is concerned with large-scale economic activity; Topics: Inflation, unemployment, aggregate demand, and aggregate supply

• Studies economic behavior as it is; Verifiable facts, not judgments; Uses scientific method (observe, hypothesize, test, refine, and continue testing)

• Involves judgments of what economic behavior ought to be; Based on value judgments; Beyond facts to ask if actions are good

What is Macroeconomics?

• The study of individuals, families, and businesses; Topics: prices, costs, profits, competition, and behavior of consumers and producers

• The study of the economy as a whole and is concerned with large-scale economic activity; Topics: Inflation, unemployment, aggregate demand, and aggregate supply

• Studies economic behavior as it is; Verifiable facts, not judgments; Uses scientific method (observe, hypothesize, test, refine, and continue testing)

• Involves judgments of what economic behavior ought to be; Based on value judgments; Beyond facts to ask if actions are good

What is another name for Free Enterprise?

• Communism

• Socialism

• Mixed

• Capitalism

The law of demand states:

• Consumers will buy more of a good when its price is lower and less when its price is higher

• Suppliers will buy more of a good when its price is higher and less when its price is lower

• Suppliers will buy more of a good when its price is lower and less when its price is higher

• Consumers will buy more of a good when its price is higher and less when its price is lower

What is the difference between a change in quantity demand and a change in demand?

• A change in demanded is a change in the amount (quantity) a consumer will purchase at given price levels.; A change in quantity demand is a shift in the market demand because of one of the 6 determinants of demand.

• A change in quantity demanded is a change in the amount (quantity) a consumer will purchase at given price levels.; A change in demand is a shift in the market demand because of one of the 6 determinants of demand.

• It shows how responsive producers are to price changes

• It shows how producers react to changes input cost

Elasticity of demand is important because

• It shows how responsive producers are to price changes

• It shows how a graph is responsive to equilibrium

• It shows how responsive consumers are to price changes

• It shows how producers react to changes in input cost

Definition of supply:

• The desire to have some good or service and the ability to pay for it.

• The willingness and ability of a producer to offer goods, services.

• A decrease in general price level

• An increase in general price level