Module 1 Vocabulary Glossary
Term
Definition
Basic economic questions
What to produce? How to produce? For whom to produce?
Benefits
What we gain when making a choice
Characteristics of money
Divisible, Stable in value, Durable, Portable, Scarce, Accepted
Counterfeit
A fake copy of something valuable
Currency
Coins and paper bills used in exchange for goods and services
Decrease in demand or supply
Curve shifts to the left
Demand
Total amount of a good or service that people are willing to buy
Demand curve slope
(From left to right) slopes downward
Economic products
Goods and services
Economics
A study of the ways people obtain their wants with limited resources.
Equilibrium price
The point where supply and demand meet - This is how much suppliers should
charge for their product.
Fiat currency
Like U.S. currency, is money the government declares legal for use in payment. We
have confidence that the money will hold its value because it was issued by the
government.
Gold Standard
The value of money was based on gold - money is NO LONGER backed by gold.
Increase in demand or supply
Curve shifts to the right
Macroeconomics
Study of the national and global economies
Market
Exchange of goods and services between buyers and sellers
measure of value
Money is used to describe the worth of an item.
Medium of exchange
Money is accepted in exchange for another item.
Microeconomics
Study of the individual, household, and business firm economies
Opportunity Cost
The most valued alternative given up when a choice is made. Opportunity cost =
“opportunity lost” or whatever is given up.
Quantity demanded
The quantity people will purchase at a specific price - a specific point along the
curve.
Quantity supplied
The quantity suppliers will produce at a specific price - a specific point on the curve.
ROTTEN
Reasons a supply curve would shift: Resources, Other goods' price, Taxes (also
subsidies and government regulation), Technology (productivity), Expectations of
the producer, Number of firms in the industry
Scarcity
Limited resources, rarity
Shortage
When price is lower than the equilibrium price then not enough will be produced so
there is a shortage (demand will increase due to the lower price, but supply will not
due to need to cover costs at a lower profit margin).
Standard of money
Money has a consistent numerical measurement.
Store of value
Money holds its value.
Supply curve slope
(from left to right) slopes upward
Supply
Total amount of a good or service available for purchase. Supply is the whole
curve,‖ supply for goods and services at all prices.
Surplus
When price is higher than the equilibrium price then too much will be produced so
there is a surplus (not as many people will want the good due to the higher price).
TRIBE
Reasons a demand curve would shift: Tastes and preferences, Related goods and
services, Income, Buyers, Expectations of price.
x-axis
On a supply and demand graph, the line that indicates quantity
y-axis
On a supply and demand graph, the line that indicates price
Module One Economics Practice Exam
1. Which situation best illustrates the basic economic questions?
A. Your sister decides to make beaded bracelets and give them to friends.
B. Your sister decides to make beaded bracelets and wear them all herself.
C. Your sister hand beads the bracelets and sells them to neighbors
D. Your sister goes to the store and purchases beaded bracelets from the jewelry department.
2. Which situation best illustrates ALL THREE of the basic economic questions?
A. You start your own shirt design company and sell your services to local businesses.
B. You start your own shirt design company for fun, making shirts for your friends.
C. You pay a shirt design company to make shirts for you.
D. You start a shirt design company using your own equipment and serve local businesses.
3. Your friend wanted a big screen TV and a class ring for birthday gifts. When her mom said she could only have
one, she chose the class ring. Her opportunity cost is the
A. The enjoyment of having a big screen TV.
B. Price of the big screen TV.
C. The enjoyment of having a class ring.
D. Price of the class ring.
4. You have to choose between being in the school play or being on the baseball team because the practices
overlap. This choice exemplifies that
A. Time is scarce.
B. Demand is scarce.
C. Music lessons are scarce.
D. Sports teams are scarce.
5. A cookie costs $2 and a shirt costs $20. If your allowance is $20 and you choose to purchase a shirt, your
opportunity cost is
A. One cookie.
B. Ten cookies.
C. One shirt.
D. Ten shirts.
6. There is a shortage of milk at $1 per gallon. The equilibrium price for milk is
A. $1 per gallon.
B. Less than $1 per gallon.
C. More than $1 per gallon.
D. Not calculable.
7. On a supply and demand graph, the line that indicates quantity is
A. The longest line.
B. The line equal to zero.
C. The x-axis.
D. The y-axis.
8. Stores are overflowing with the latest car racing video game at $20. Store managers are frustrated with the lack
of sales. The equilibrium price for this video game is
A. More than $20.
B. Less than $20.
C. $20.
D. Not calculable.
9. A decrease in demand causes the demand curve to
A. Shift to the left.
B. Shift to the right.
C. Increase its slope.
D. Decrease its slope.
10. When price decrease, quantity supplied
A. Decreases.
B. Increases.
C. Becomes zero.
D. Stays the same.
11. Which may occur as a result of a decrease in the price of minivans?
A. Increase in demand
B. Increase in quantity demanded
C. Decrease in demand
D. Decrease in quantity demanded
12. Use the graph to answer the following question.
Which line indicates an increase in supply?
A. 1
B. 2
C. 3
D. 4
13. Use the graph to answer the following question.
Which of the following may occur as a result of an
decrease in the price of cell phones?
A. Shift from line 1 to line 2
B. Move from point S to point U
C. Shift from line 2 to line 1
D. Move from point U to point S
14. Your teacher says your history book is worth about fifty dollars. Your teacher is using money as a
A. Standard.
B. Store of value.
C. Measure of value.
D. Medium of exchange.
15. The gold standard is:
A. What United States paper money is “backed” by
B. The weight of US paper money.
C. Government stores of valuables.
D. No longer in use – money is backed by public and government acceptance.
Answers are on the next
page. 
Answers:
1: C – The basic economic questions are: What to produce, How to produce, & For whom to produce?
2: D – This answer demonstrates all three economics questions (option A does not show “how to produce”).
3: A – “Opportunity cost = Opportunity lost”, the best alternative, what you gave up.
4: A – Scarcity is limited resources, or rarity. It is often time or money.
5: B – You could have spent the same $20 on cookies, since each cookie costs $2, you must divide $20 by $2 to
determine how many cookies were given up by buying 1 shirt.
6: C – Equilibrium is the point where supply and demand curves meet. This is how much suppliers should charge for
their product. If suppliers charge too little, it will create a shortage. Charging too much will create a surplus.
7: C - On a supply and demand graph, the line that indicates quantity is the x-axis. The y-axis indicates price.
8: B - Equilibrium is the point where supply and demand curves meet. This is how much suppliers should charge for their
product. If suppliers charge too little, it will create a shortage. Charging too much will create a surplus.
9: A – For shifts in supply and demand, “Left is Less and Right is more”. Review ROTTEN and TRIBE for reasons for supply
or demand curve shifts.
10: A - Quantity supplied is the quantity suppliers will produce at a specific price - a specific point on the curve. A change
in price will not cause the entire curve to shift.
11: D - Quantity demanded is the quantity people will purchase at a specific price - a specific point along the curve. A
change in price alone will not cause the entire curve to shift.
12: C - Supply curves point from left to right up on the page. Shifts to the right indicate increases. Shifts to the left
indicate decreases.
13: B – Price alone will NOT cause the entire curve to shift. Use the values on the y-axis to determine a reduction in price
and the new plotted point on the original curve.
14: C - Measure of Value - Money is used to describe the worth of an item.
15: D – The gold standard was abandoned in the Great Depression. Now money is backed by public and government
acceptance.