Sunday, May 6, 2012


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Unit 1 Reading Assignment

Ch. 1 Terms

1) Economics � the study of human efforts to satisfy needs and wants using scarce resources.

) Capital � tools and machines used to produce a good or service for sale.

Cheap Custom Essays on Economics

) Production � process of creating goods and services with the combined use of land, capital, labor, and entrepreneurship.

4) Service � work or labor performed for someone.

5) Trade-offs � alternatives that must be given up when one is chosen rather than another.

6) Production Possibilities Frontier � diagram representing maximum combination of goods and or services an economy can produce when all productive resources are fully employed.

7) Want � way of expressing or communicating a need; a broader classification than needs.

8) Financial Capital � money used to buy the tools and equipment to be used in production.

) Good � tangible economic product that is useful, relatively scare, transferable to others, used to satisfy wants and needs.

10) Utility � amount of satisfaction derived from using a product.

11) Opportunity Costs � cost of the best next alternative use of money, time, or resources when one choice is made rather than another.

1) Factors of Production � productive resources that make up the 4 categories land, capital, labor, and entrepreneurship.

14) Labor � people with all their abilities and efforts, 1 of 4 production factors, does not include entrepreneurship.

15) Consumer Good � good intended for final use by consumer rather than business.

16) Productivity � the amount of production per worker per hour; degree to which productive resources are used efficiently. Normally refers to labor, but can apply to all factors of production.

17) Free Enterprise � economy in which competition is allowed to flourish with a minimum of govt. interference.

18) Land � natural resources or “gifts of nature” not created by human effort, 1 of 4 factors of production.

1) Entrepreneur � risk-taking individual in search of profits, 1 of 4 factors of production.

1) Capital Good � tool, equipment and other manufactured goods used to produce other goods and services; a factor of production.

0) Specialization � assignment of tasks so that each worker performs fewer functions more frequently, same as division of labor.

1) Standard of Living � quality of life based on ownership of necessities and luxuries that make life easier.

Ch. Terms

) Economy � a way to provide for the wants and needs of people.

) Market Economy � economy where demand and price help people make decisions to relieve funds.

4) Competition � the game between sellers in which they lower prices to sell worse or the opposite.

5) Economic System � a way people provide for their wants and needs.

6) Capitalism � economic system where private owners own and operate their businesses for profit; govt. has no control of factors of production.

7) Traditional Economy � economic system where the location of scarce resources and other economic activity is the result of ritual, habit, or custom; based on past; isolated; agrarian (farms).

8) Voluntary Exchange � where buyers and sellers work with each other openly in market transactions.

) Command Economy � system in which a main authority makes economic decisions.

0) Profit Motive � happens with capitalism and free enterprise; drive for business owners or employees to improve their economic well being.

Ch. 4 Terms

1) Microeconomics � branch of economic theory that deals with behavior and decision making by small units such as individuals or firms.

) Law of Demand � as prices increase, demand decreases.

) Change in quantity demanded � movement on the demand curve showing that a different quantity is purchased in response to a change in price.

4) Complements � products that raise the value of other products.

5) Demand � the want or desire to purchase a product.

6) Marginal Utility � the feeling of happiness of satisfaction or usefulness from an obtained product.

7) Elasticity � a way to measure response that shows us how a dependent variable such as quantity responds to a change in an independent variable such as price.

8) Demand Schedule � list or diagram that shows want of a product at all prices at a given time.

) Diminishing Marginal Utility � the amount of satisfaction derived from using a product decreases with continued usage.

40) Income Effect � the part of change in quantity demand caused by a consumer’s income when the price of the product changes.

41) Elastic � elasticity where the change of the independent variable usually price causes a more than proportional change in the dependent variable demand.

4) Demand Curve � graph that shows demand at every price at a time.

4) Demand Change � change in want of a product at all prices.

44) Substitution Effect � the amount of change in quantity demand due to change in relative price.

45) Inelastic � elasticity where the change of the independent variable usually price causes a less than proportional change in the dependent variable demand.

Ch. 5 Terms

46) Law of Supply � rule that says more will be offered for sale at higher price rather than at lower.

47) Supply Change � changes at all prices.

48) Theory of Production � theory dealing with the relationship between the factors of production and the output of goods and services.

4) Fixed Cost � the cost of production that does not change when output changes.

50) Break-even Point � the amount of production needed for a company to receive its costs back.

51) Supply � map or schedule of quantities for sale at all possible prices.

5) Change in Quantity Supplied � change in amount for sale in response to a price change.

5) Law of Variable Proportions � law stating that short-term output will change with variable input.

54) Variable Cost � production cost that varies as output changes; labor, energy, raw materials.

55) Supply Schedule � tubular listing showing the quantities produced or offered for sale at each and every possible price in the market.

57 Diminishing Returns � stage of production where output increases at a decreasing rate as more units of variable input are added.

58) Total Revenue � price of goods sold times quantity sold.

5) Supply Curve � graphical representation of the quantities produced at each and every possible price.

60) Marginal Analysis � decision making that compares the extra cost of doing something to the extra benefits gained.

Ch. 6 Terms

61) Price � the amount of money paid for a good or service.

6) Shortage � when supplied quantity doesn’t meet quantity of demand.

6) Economic Model � set of assumptions on a table, graph, or equation used to describe or explain economic behavior.

64) Equilibrium � place on a graph where supply and demand curves meet.

65) Market Equilibrium � place where demand meets supply on graph.

66) Price Ceiling � maximum legal price that can be put on a product.

67) Surplus � where quantity demand is below quantity supply.

68) Minimum Wage � lowest legal wage that can be paid to most workers.

Ch. 1 Questions

Pg. 10

) The basic term that describes the fundamental economic problem is scarcity. Scarcity faces all societies and is the condition of not having enough resources to produce all those things people would LIKE to have (secondary wants), which would include more things people could ever hope to obtain.

4) What to produce?

How to produce?

From whom to produce?

5) The factors of production include Land, Labor, Capital, and Management. These are the resources we don’t have enough of, which are required to produce the secondary wants of people. Land includes all the natural resources (oil, water, dirt, wood). Labor is the mental and physical effort to produce a good or service for sale. Capital is the tools and machines used to produce a good for sale. Management is the organization of all the other resources.

Pg. 17

) For something to have value it obviously must have utility, or usefulness. And when something has such a value and utility it must also be scarce. This is where wealth comes in. Those things that have this great value, utility, and scarcity can give a person great wealth when in their possession.

5) Productivity is measured by how much output is produced from a given amount of input and time. Therefore business owners buy the best goods or land for more efficiency. This efficiency increases productivity over time. So productivity is important in being successful in the economy.

Pg. 5

) A trade-off is basically a decision that people make in their every day lives. And the opportunity cost is what you could have done instead, most likely something else more beneficial.

Ch. Questions


) A traditional economy has roles that are given to all members of the community. It is isolated, stable, predictable, and based on the past. It also discourages new ways and lowers standard of living.

4) In a command economy change is very likely over a short period of time. Life decisions are very certain and many services are available. As for disadvantages many resources are consumed, new ideas are again discouraged, and the wants and needs of people are not meet.

5) In a market economy freedom is very popular. The govt. rarely interferes, there are plentiful goods, and people are very satisfied. As for disadvantages Not enough public goods are produced, only productive resources are concentrated on, and workers or business often remain uncertain.

Pg. 44

) The seven major goals of the United States Economic freedom means having preference in occupations, employers, and uses of their money. Economic efficiency means that people must watch how they use their scarce resources so that they benefit in the end by getting their needs and wants. Economic equity simply means people would like to be treated equally without discrimination or lack of justice. Economic security means that Americans desire protection greatly when it comes to employment and health. Full employment is needed presently with so many people needing employment to live their lives peacefully. Price stability is very important because people only have so much money to take care of themselves. Economic growth is one of the most important because nothing better is gained without growth in the economy.

Pg. 51

) Economic freedom, voluntary exchange, private property rights, profit motive, and competition are the 5 major characteristics of a free enterprise system.

4) The entrepreneur is the organizer or manager of the factors of production. He manages this land, capital, and labor in order to receive a profit.

5) Consumers basically are the decision-makers when it comes down to whether a product is going to sell and stay or not. They are the voters in other words. The select the most popular products.

Ch. 4 Questions


4) The greater quantity that is produced and consumed, the less in value or price it becomes. This relates to the law of diminishing marginal utility in that the more something is used the less satisfaction is produced.


4) As price goes up there is a decrease in quantity produced because the demand for a product’s substitute has dropped.

Pg. 107

) There are three questions or determinates of demand elasticity Can the purchase be delayed? Are adequate substitutes available? Does the purchase use a large portion of income? Some products that are very in demand cannot be delayed or elastic. IF adequate substitutes are available then elasticity is probable with no harm done. And if the answer to the third question is “yes,” then demand tends to be elastic.

Ch. 5 Questions

Pg. 10

5) The factors that can cause a change in supply are cost of inputs, productivity, technology, taxes and subsidies, expectations, govt. regulations, and number of sellers.

Pg. 15

4) In the first stage marginal product increases drastically and then begins to slow down in stage . Then by the end of stage marginal product has slightly begun to drop. Increasing, diminishing, and negative returns is what you call this.

5) Equilibrium

Pg. 11

) The four measures of cost are fixed cost, variable cost, total cost, and marginal cost.

4) Total revenue is the number of units sold times the average price per unit. Marginal revenue is the dividing of change in total revenue by the marginal product.

Pg. 140

) Producers and consumers each act differently to prices. High prices tell producers to produce more and consumers to buy less. And low prices tell consumers to consume more and producers to produce less.

4) First, prices are always neutral in our very competitive economy because they are in favor of neither the producer nor consumer. Second, prices are very flexible in the market economy. And third, prices have no cost of administration.

Pg. 148)

) Prices are determined based on market models or graphs showing demand and supply. A change in price is usually the result of change in demand, supply, or both. Elasticity can also effect prices.

Pg. 155)

) When a fixed price is put on a product, this price cannot adjust to its equilibrium levels and the price system can not get out accurate information to the other buyers and sellers in the market.

4) A loan support is basically a loan that is given to someone or two a business to get them started in order to be successful. As they sell their product or service they pay back this debt to the loaner or they could even let the loaner take over their business. Deficiency payments were come up with after the loan program began to receive enormous stockpiles of food. So the loan program told the producer to sell their product for the best price possible and they would make up the difference with a check. This check is the deficiency payment.

5) Markets speak collectively for buyers and sellers who trade in the markets. They are said to talk when prices in them move up or down significantly. So if an investor saw prices move up in their stock they may make an accurate prediction on the outcome and decide to sell it money or gold.

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