Chapter 1
Economics is best defined as the study of _______.
how society manages its scarce resources
True or False
Economists always agree on which public policy is the best.
False
Opportunity Cost is...
whatever must be given up to obtain some item
True or False: The supply curve for a good shows how the quantity supplied depends on the price. According to the law of supply, as the good’s price rises, the quantity supplied rises. That’s why the supply curve slopes upward.
True
Price elasticity of demand=
Percentage change in QD/Percentage change in price
Adam Smith's "invisible hand" refers to _______.
how households and firms, acting in their own self-interest, manage to make everyone better off
What is the difference between a normative and positive statement?
Ex: Minimum-wage laws cause unemployment.
The government should raise the minimum wage.
After Frank and Ruby engage in trade, each of them _______.
consumes at a point outside their production possibilities frontier
What shifts the supply curve?
Input prices, Technology, Number of sellers, Expectations
Elasticity is..
a measure of the responsiveness of the quantity demanded or quantity supplied to a change in one of its determinants
Productivity is defined as the _______.
amount of output produced from each unit of labor input
A point inside the production possibilities frontier is _______.
feasible but not efficient
Absolute Advantage is...
the ability to produce a good using fewer inputs than another producer
What shifts the demand curve?
Income, Prices of Related goods, Tastes, expectations, Number of Buyers
An increase in the supply of grain will reduce the total revenue grain producers receive if _______.
the demand curve is inelastic
f a government uses the tools of monetary policy to reduce the demand for goods and services, the likely result is ________ inflation and ________ unemployment in the short run.
Lower, higher
In the simple circular-flow diagrams, the participants in the economy are _______.
households and firms
A nation will typically import those goods in which _______.
other nations have a comparative advantage
Movie tickets and film streaming services are substitutes. If the price of film streaming increases, what happens in the market for movie tickets?
The demand curve shifts to the right.
The income elasticity of demand measures how much the quantity demanded responds to changes in__________________
consumer income
The main reason that some nations have higher average living standards than others is that _______.
some nations have higher levels of productivity
Economists may disagree because they have different _______.
hunches about the validity of alternative theories judgments about the size of key parameters. political philosophies about the goals of public policy
(Scientific Judgments, Values, Perception v Reality)
Juanita can read 30 pages of economics in an hour. She can also read 20 pages of sociology in an hour. She spends 6 hours per day studying.
Juanita's opportunity cost of reading 60 pages of sociology is_______pages of economics.
60 pages sociology -3hrs
30+30+30=90
If pasta is an inferior good, then the demand curve shifts to the ________ when ________ rises.
left; consumers' income
The Determinants of Price Elasticity of Demand are:
Availability of close substitutes, necessities and luxuries, defining the market broadly v narrowly, time horizon