Economics Notes

● Positive economics focuses on facts and cause-and-effect relationships. It avoids value judgments and tries to establish scientific statements about economic behavior. Such scientific-based analysis is critical to good policy analysis. ● Scarce economic resources means limited goods and services. A budget line or budget constraint is a schedule or ● curve that shows various combinations of two products a consumer can purchase with a specific income. Although we assume two products, the analysis generalizes to the full range of products available to consumers. The economizing problem refers to the need to make choices because economic wants exceed economic means. (Enter one word in the blank.) ● The ratio of the price of two goods on a graphed budget line is ● measured by its slope. increase in income shifts the budget line to the right; a decrease in money income shifts it to the left. ● The budget line varies with income. An ● Land and mineral resources, transportation and communication facilities, factories and farm buildings, equipment, tools and machinery are all examples of scarce economic resources. ● Which of the following resources would be considered to be land by (Forests, oil and mineral deposits, Arable land, Water) ● What does every point on a budget line graph represent? All combinations of goods that can be purchased with a given income an economist? ● In this figure, obtaining more books by giving up some movies is called a(n) trade-off; whereas losing two books in order to gain 1 movie is referred to as opportunity cost. ● The work-related activities of a teacher and doctor fall under the labor. ● For economists, capital (or capital goods) includes all manufactured aids used in producing consumer goods and services. ● A manufacturing firm builds a new warehouse to expand its inventory capacity. Economists refer to this activity as investments. resource category of ● The term "capital" as used by economists does not refer to money. ● What is the simplified term economists use to refer to "factors of production"? Inputs ● This production possibilities table lists the different combinations of pizza and robots that can be produced with a specific set of resources. ● In economics, the term investments describes spending that pays for the production and accumulation of capital goods. ● A production possibilities curve (PPC) illustrates the attainable combination of two goods that can be produced given a specific set of resources. ● Which statement best describes combinations of goods that are beyond the production possibilities curve? They are unattainable. ● The outward bowing shape of the production possibilities curve is due to the law of increasing opportunity costs. ● Taken together, the four general categories of economic resources (land, labor, capital, and entrepreneurial ability) are referred to as which of the following? Factors of production, inputs ● When an economy produces a good such that the marginal benefit equals the marginal cost, this indicates that resources are being allocated efficiently ● Points lying outside the production possibilities curve represent greater, but unachievable levels of output with current inputs, than any point on the curve. ● Specializing and participating in international trade allows an economy to do which of the following? (Circumvent the output limits imposed by its own production possibilities curve, Increase the quantities of capital and consumer goods available to society) ● Which of the following enables society to produce more goods with current resources? Advances in technology ● ● ● ●