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The study of how society makes choices in using its limited resources.
Economics
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What we give up to get something else.
Opportunity cost
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A market in which profit opportunities are eliminated almost instantaneously.
efficient market
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Best described as the study of the choices made by individual households, firms, and governments.
Microeconomics
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Is best described as the study of nation's economy as a whole.
Macroeconomics
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An approach to economics that applies statistical techniques and data to economic problems.
positive economics.
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answers the question "What ought to be?"
Normative economics
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The compilation of data that describe phenomena and facts refers to
descriptive economics.
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The four criteria that are frequently used in judging the outcome of economic policy are efficiency, stability, economic growth, and equity.
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The process by which resources are transformed into useful forms.
Production
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Economists refer to things that have already been produced that are in turn used to produce other goods and services as
capital.
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According to the theory of ________, specialization and free trade will benefit all trade partners, even when some are absolutely more efficient producers than others.
comparative advantage
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Saving is an example of
trading present benefits for future benefits.
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Because resources are scarce, the opportunity cost of investment in capital is
foregone present consumption.
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All the combinations of goods and services that can be produced if all of society's resources are used efficiently are represented on an
economy's production possibility frontier.
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The value of the slope of a society's production possibility frontier is called its
marginal rate of transformation.
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Production decisions are centralized in a
command economy.
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In a ________ economy, the behavior of buyers and sellers determines what gets produced, how it is produced, and who gets it.
laissez-faire
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In which system are decisions made by thousands of people who have information about resources, production technology and consumer desires?
market system
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In a laissez-faire economy, what provides individuals the information needed to make decisions?
prices
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According to the law of demand there is negative relationship between ________ and ________.
price; quantity demanded
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If the demand for mac and cheese decreases as income increases, mac and cheese is a(n) inferior good.
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If the demand for green tea increases as income increases, green tea is a(n)
normal good.
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Suppose the demand for lawnmowers goes down when the price of gasoline goes up. We can say that these two goods are
complements.
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Demand for one item goes down when the price of another item goes down. These items must be
substitutes.
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A change in the ________ of a good or service leads to a change in ________ that leads to a ________.
price; quantity demanded; movement along the demand curve
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A change in ________ leads to a change in demand that causes a ________.
income or price of other goods; shift in the demand curve
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According to the law of ________, there is a positive relationship between price and supply;
the quantity supplied
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The change in the ________ of a good leads to a change in ________, which leads to price;
quantity supplied; movement along a supply curve
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When quantity demanded equals quantity supplied the market is in
equilibrium.
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Which of the following will definitely occur when there is a simultaneous increase in demand and an increase in supply?
an increase in equilibrium quantity
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Which of the following will definitely occur when there is a decrease in the supply of and an increase in demand for wireless speakers?
an increase in equilibrium price
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A situation where illegal trading at market prices takes place is known in economics as a
black market.
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An example of a ________ would be the government setting the price of coffee below the equilibrium price.
price ceiling
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An effective price floor must be
set above the equilibrium price.
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An effective price ceiling must be
set below the equilibrium price.
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A surplus will occur if a ________ is set ________ the equilibrium price.
price floor; above
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A shortage will occur if a ________ is set ________ the equilibrium price.
price ceiling; below
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The rationing mechanism in market economies is the
adjustment of price
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