Econ 2201 Exam 1

  1. What is Scarcity?
    a situation in which unlimited wants exceed the limited resources available to fulfill those wants
  2. Define Economics
    the study of the choices people make to attain their goals given their scarce resources
  3. Define Economic model
    A simplified version of reality used to analyze real-world economic situations
  4. Define Market
    A group of buyers and sellers of a good or service and the institution or arrangement by which they come together
  5. What are the 3 key economic principles
    • People are rational
    • People respond to economic incentives 
    • Optimal decisions are made at margin
  6. Define Marginal analysis
    analysis that involves comparing marginal benefits and marginal costs
  7. Define Trade-off
    the idea that because of scarcity, producing more of one good or service means producing less of another good or service
  8. Define Opportunity cost
    the highest valued alternative that must be given up to engage in an activity
  9. What determines what goods will be produced?
    Supply and demand
  10. What determines how these goods and services are produced?
    Opportunity cost
  11. Who will recive these goods and services
    Those who are both willing and able to pay
  12. Define centrally planned economy
    an economy in which the government decides how economic resources will be allocated.
  13. Define Market economy
    An economy in which the decisions of households and firms interacting in markets allocate economic resources
  14. Define mixed economy
    An economy in which most economic decisions result from the interaction of buyers and sellers in markets but in which the government plays a significant role in allocation of resources
  15. Define productive efficiency
    A situation in which a good or service is produced at the lowest possible cost
  16. define allocative effiency
    a state of the economy in which production is in accordance with consumer preferences; in particular, every good or services is produced up to the point where the last unit provides a marginal benefit to society equal to the marginal cost of producing it (competition)
  17. Define voluntary exchange
    A situation that occurs in markets when both the buyer ans the seller of a product are made better off by the transaction
  18. Define equity
    the fair distribution of economic benifits
  19. How is an economic model made?
    • 1. Decide on the assumptions to use in developing the model
    • 2. Formulate a testable hypothesis 
    • 3. Use economic data to test hypothesis 
    • 4. Revise the model of it fails to explain your economic data well
    • 5. Retain the revised model to help answer similar economic concepts in the future.
  20. What is the role of assumptions in economic models?
    To simplify things.
  21. Define Economic variable
    Something measurable that can have different values, such as the income of doctors
  22. Define positive analysis
    Analysis concered with what is
  23. Define Normative analysis
    Analysis concerned with what ought to be
  24. Define microeconomics
    the study of how households and firms make choices, how they interact with markets, and how the government, attempts to influence their choices.
  25. Define Macroeconomics
    The study of economy as a whole, including topics such as inflation, unemployment, and economic growth
Card Set
Econ 2201 Exam 1