Economics Costs
[the “science of scarcity”] Scarcity
Choices
6.
7.
Note Sheet – Intro to Economics
1. Economics- ______________________________
__________________________________________
__________________________________________
2. The inductive method moves from (facts to
generalizations/generalizations to facts).
Theories and generalizations (are/are not) the same thing.[Theories are abstract generalizations]
The deductive method moves from (facts to generalizations/generalizations to facts).
Descriptive economics is the process of gathering (generalizations/facts) about
economic behavior of individuals and institutions.
Economic theories are (specifics/generalizations) based upon observing all the facts.
They are called "laws", principles, generalizations or models.
Economic laws that lead to policy are not true in every situation, but they are
Unlimited
_
Needs_and
_ Wants
3.
4.
5.
I hope to become
an “E”con guru.
Choice
s
Limited
(Scarce)
Resources
(useful/not useful) because they allow us to predict & therefore(control or adjust to events/
not control or adjust to events).
8. Economic models (abstract/leave in) the complexities of the real world.
9. "Ceteris paribus" - "other things being __________". That is "all variables are constant
except ___." In reality, this is not possible. Ceteris paribus theories are like maps that help
us understand but leave out details.
Positive e-con means
10. “Ceteris paribus model" allows us to reason about the relationship
you can test it [descriptive].
between variables __ & __ without the intrusion of variable __.
It is scientific[objective],
11. An hypothesis is a tentative, (tested/untested) principle.
and in the economy.
[If the hypothesis passes the test, it becomes economic theory.]
Normative e-con is
12. A positive statement is concerned with (what is/what ought to be).
the reverse of these 3.
They collect and present facts.
You can’t test it. It is
subjective, & should be in
l3. A normative statement is based upon (facts/value judgments).
the economy.[prescriptive].
These statements are concerned with what the economy should
be like or which policies are best.
14. An example of a normative statement would be (It is too
hot to jog today./The temperature is 88 degrees today.)
15. Ideally, value judgments are involved at the
(level of policy only/level of facts only).
16. Most of the disagreement among economists involves
(positive/normative) statements as regards economic (policy/facts).
17. Microeconomics is concerned with
(specific economic units/the entire economy).
18. Which of the following is associated with macroeconomics?
What
what
Forest?
(an examination of the incomes of Richland Duck graduates/
unemployment in the civilian labor force).
19. Which of the following is a microeconomic statement?
2 levels of
(GDP decreased by 1% last year/Auto prices declined this year).
analysis
Micro
Individual
components
Macro
“Big Picture”
“Chuckholes to Economic Thinking”
Now, I see things
in a different light.
No more chuckholes.
You must read the
economics textbook.
“Direct”
[Positive relationship]
Y “No relationship”
[Increasing X has
no effect on Y]
$10
“Zero Slope”
X
0 Calories consumed
C
X
0 100 200 300 400
Crime rate in Dallas
Y
“Inverse”
D
Y “No relationship”
[Negative
relationship]
[Incr.Y has no effect on X]
$14
$12
$10
$8
$6
X
0 Ave miles jogged
Infinite slope
Body Weight
Y
B
Body Weight
A
$ of Tea in China
20. Bias – preconceptions that (are/are not) based on facts.
21. Loaded terminology - (emotional/non-emotional) terms leading to a nonobjective analysis.
22. Definitions - economic words have different meanings. Ex: "utility" means (extra/
satisfaction); “investment" means (money/tools, machinery,
& factories); "price floors" are (above/below) "price ceilings".
X
400
23. In which graph above is the amount of “Y” inversely related to the amount of “X”? ___
24. In which graph above is the amount of “Y”[constant at $10] unrelated to the
increasing amount of “X”? ____
25. In which graph above is the amount of “Y” directly related to the amount of “X”? ____
Chapter 2 - The Economizing Problem[Dealing with scarcity]
["Scarcity, choices, and costs are the building blocks of this chapter.]
33. The economizing problem is deciding how to make the best use of
(limited/unlimited) resources to satisfy (limited/unlimited) wants.
34. Money is not considered an economic resource because money
(is/is not) productive. The process of accumulating capital goods
(tools, machinery, & factories) is (depreciation/investment).
35. Give examples of real capital. A._________ B. _________
Land
Labor
Capital
Not only do I want
a cracker-we all
want a cracker.
Entrepreneur
36. The payments for the 4 factors of production are:
37. The PPC illustrates the principle that if all resources of an economy are in use,
more of one good can be produced only if (more/less) of another good is produced.
38. Give two reasons that could shift the PPC outward. ____________ ___________
39. The opportunity (cost/benefit) is the best alternative foregone. [2nd best choice]
40. At what point is there unemployment[recession]?___
41. What points are resources being used in their most
42. At what point is there an improvement in technology,
therefore a new PPC frontier line? _____
43. The (straight line/curve) illustrates the "line of increasing
(opportunity) cost"? ____
44. The (straight line/curve) illustrates the "law of constant
cost"? [equally substitutable] ___
45. At what point would there be the most economic growth
in the future if a country were producing there now? ___
46. What is the opportunity cost(what is given up) when
moving from point "C" to "D"? ___
Capital Goods
productive manner?[full employment & full production with best technology] __________
A
B
G
C
F
D
E
Consumer goods
47. Refer to the PPC graph. The U.S. entered WWII from the Great Depression.
Therefore it moved from letter ___(Gr. Depression) to letter ___
[full employment with a good mix of wartime and civilian goods].
48. Refer to graph. As WWII started, the Soviet Union was at full employment.
If "C" & "D" were the only 2 letters on the curve, they would have moved from letter ___ to ___.
49. A reduction in unemployment will (push out the PPC/get us closer to where we
should be on the PPC).
Chapter 4 - Pure Capitalism & the Circular Flow
50. The following is unique to capitalist ideology: (use of money/specialization/
private ownership of property resources).
51."Roundabout production"(assembly line) leads to (use of fewer capital goods/greater production)
Crusoe
[for questions 52-55]
Has surplus fish
Wants coconuts
Friday
Saturday
Has surplus coconuts
Wants bananas
Has surplus bananas
Wants fish
52. Crusoe would get coconuts from (Friday/Saturday).
53. There (is/is no) coincidence of wants between any 2 states.
54. Money would flow (clockwise/counterclockwise).
55. The "coincidence of wants" problem means each
transactor (must/must not) have a product which the other wants.
3
GDP
Rent,
Wages,
Profits,
Interest
Resource
Market
Households
1
GDI
Land,
Labor,
& Entrepreneurship
Fuzzy Wuzzy
Product
Consumer
Expenditures
Market
4
2
Capital,
Goods &
Services
Businesses
[Firms]
56. In the product market of the circular flow model (householders/businesses)
are the demanders and (householders/businesses) are the suppliers.
57. In the resource market of the circular flow model (householders/businesses)
are the demanders and (householders/businesses) are the suppliers.
58. In the resource market, (householders/businesses) sell resources to
(householders/businesses).
59. In the product market, (householders/businesses) sell products[goods/services]
to (householders/businesses).
$
S(Consumers)
D(Businesses)
GDI
Households
$
Resource
Market
1
2
Circular Flow
Businesses
3
4
Product
Market
60. Which flow above represents goods/services being sold? ____
61. Which flow above represents consumers buying products? ___
62. Which flow above represents land, labor, capital, & entrepreneurial ability? ___
63. Which flow above represents wages, rents, interest, & profits? ____