Economics Chapter 1 Flashcards

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Questions and Answers

Which of the following results from having scarce economic resources? (Select all that apply)

Deflation

Poverty and unequal distribution of wealth (correct)

Inflation

The production of limited goods and services (correct)

The production of unlimited goods and services

All nations have experienced widespread unemployment and unused production capacity from business downturns at one time or another.

True

A statement about economic behavior or the economy that enables prediction of the probable effects of certain actions is known as an: (Select all that apply)

Normative economic statement

Economic model

Economic principle (correct)

Economic theory (correct)

What best clarifies the 'other-things-equal' assumption?

All variables except those under immediate consideration are held constant for a particular analysis. Signup and view all the answers

What defines positive economics?

A focus on facts and cause-and-effect relationships. Signup and view all the answers

Positive economics encourages value judgments.

False Signup and view all the answers

What term refers to the economics that considers the desirability of certain aspects of the economy?

Normative economics Signup and view all the answers

_ economic analysis concerns what is, whereas _ economic analysis embodies subjective feelings about what ought to be.

Positive; Normative Signup and view all the answers

Normative, value-based policy questions or statements give rise to:

Controversy or disagreement among economists. Signup and view all the answers

As a result of our incomes and wants, it is in our self-interest to economize.

limited; insatiable Signup and view all the answers

Which of the following describes a budget line?

A curve showing various combinations of two products a consumer can purchase with a specific amount of income. Signup and view all the answers

Which of the following combinations are unattainable given a consumer's budget line?

Combinations that fall beyond the budget line. Signup and view all the answers

The straight-line budget constraint indicates _____ opportunity cost.

Constant Signup and view all the answers

What is the relationship between trade-offs and opportunity cost?

As you give up consumption or production of one good over another, an opportunity cost is incurred. Signup and view all the answers

Why must consumers forego choices based on a limited budget?

Consumers spend their limited budget purchasing a combination of goods that maximize their utility. Signup and view all the answers

What will shift the budget line to the right?

An increase in income. Signup and view all the answers

As individuals' incomes rise, they will still be confronted with what?

Opportunity cost, Trade-offs, and Choices. Signup and view all the answers

What are factors of production?

Labor, crude oil, land, entrepreneurial ability, capital. Signup and view all the answers

How do capital goods differ from consumer goods?

Consumer goods satisfy wants directly, while capital goods satisfy consumer wants indirectly through the production of consumer goods. Signup and view all the answers

What concept refers to the notion that all variables except those under immediate consideration are held constant?

The other-things-equal assumption, and ceteris paribus. Signup and view all the answers

What focuses on facts and cause-and-effect relationships?

Positive economics Signup and view all the answers

Positive economics ____ value judgments, tries to establish _ statements about economic behavior, and deals with ___ economic events.

avoids; scientific; actual Signup and view all the answers

What do trade-offs arising from limited resources give rise to?

Opportunity costs. Signup and view all the answers

Even at higher levels of ______, people will still face spending trade-offs, choices, and opportunity costs.

Income Signup and view all the answers

What are considered scarce economic ______ to production?

Resources Signup and view all the answers

_ goods satisfy wants directly, whereas _ goods do so indirectly.

Consumer; Capital Signup and view all the answers

Study Notes

Scarcity and Economic Resources

Scarcity leads to the production of limited goods and services.
All nations have faced unemployment and unused production capacity during business downturns.
Economic resources include labor, crude oil, land, entrepreneurial ability, and capital.

Economic Theories and Principles

An economic theory or economic principle predicts effects of actions on economic behavior.
Positive economics focuses on facts, cause-and-effect relationships, and scientific statements about economic behavior.
Normative economics evaluates the desirability of economic aspects and supports specific policies.

Economic Analysis

Positive economic analysis concerns "what is", while normative analysis focuses on "what ought to be."
Normative statements can lead to controversy or disagreement among economists.

Budget Constraints and Choices

Consumers face limited budgets and must make choices to maximize satisfaction.
A budget line shows combinations of two products that can be purchased within a budget.
Combinations beyond the budget line are considered unattainable.

Opportunity Cost and Trade-offs

The straight-line budget constraint indicates constant opportunity costs.
When consumption of one good is sacrificed for another, the trade-off incurs an opportunity cost.

Consumer Behavior

Consumers aim to maximize utility within their limited budgets; they face choices, trade-offs, and opportunity costs regardless of income level.
An increase in income shifts the budget line to the right.

Capital vs. Consumer Goods

Consumer goods directly satisfy wants; capital goods satisfy wants indirectly by producing consumer goods.
Understanding the nature of goods is crucial in economic production and consumer choice.

Assumptions in Economic Analysis

The other-things-equal assumption (ceteris paribus) simplifies analysis by holding all variables except the ones under consideration constant.
Positive economics avoids value judgments, establishes scientific statements, and deals with actual events.

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Description

Test your understanding of key concepts in Economics Chapter 1, focusing on limits, alternatives, and choices. This quiz uses flashcards to reinforce fundamental economic principles and explore scenarios resulting from scarce resources. Challenge yourself and improve your grasp of economic decision-making!