Study Guide Chapters 1-11

Study Guide Chapters 1-11 - CHAPTER 1 What is economics?...

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CHAPTER 1 What is economics ? (pg. 2) o The study of scarce resources to satisfy unlimited wants What is microeconomics ? (pg. 3) o The study of one unit in the economy eg. individuals units such as a person, a household, a firm, or an industry What is macroeconomics ? (pg. 3) o The study of the economy as a whole eg. unemployment, inflation, interest rate, and banking system What is normative economics ? (pg. 10) o Focuses on “what should be” o Incorporates value judgments about what the economy should be like What is positive economics ? (pg. 10) o Focuses on “what is” o Focuses on facts, cause-and-effect, and descriptive statements What is economic theory ? (pg. 7) o It is the combination of macroeconomics and microeconomics o It uses mathematics, statistics, graphs, and econometrics What is ceteris paribus ? (pg. 8) o The assumption that other factors remain constant; unchanged; fixed CHAPTER 2 What is scarcity ? (pg. 27) o Scarce economic resources mean limited goods and services o It exists because human wants always exceed what can be produced with the limited resources and time that nature makes available o It restricts options and demands choices What are the resources or factors of production ? (pg. 28) o Land Natural resources used to produce goods and services o Labor Physical and mental talents that are used to help produce goods & services o Physical Capital All manufactured resources used to produce goods and services eg. buildings, equipment, and machines o Human Capital The accumulated training and education of workers o Entrepreneurship The human ability to make non-routine decisions, to innovate, to make strategic decisions, and to bear risks
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Performs the functions of raising capital, organizing, managing, and assembling other factors of production, making basic business policy decisions, and taking risks What is the meaning of opportunity cost ? (pg. 30) o It is the next-best alternative choice that must be sacrificed to satisfy a want What is the production possibilities curve ? (pg. 32-35) o It displays the different combinations of maximum outputs of two goods that could be produced in a fully employed economy It assumes fixed (constant) resources and fixed (constant) technology o It helps us examine the trade-off between capital goods and consumer goods What is the meaning of specialization ? What do we get from it? (pg. 39-40) o The use of resources of an individual, firm, region, or nation to produce one or a few goods or services rather than the entire range of goods and services o Those goods and services are then exchanged for a full range of desired products o What do we get from it? Better quality, higher production/output, skilled labor
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Study Guide Chapters 1-11 - CHAPTER 1 What is economics?...

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