Download Instructor: Sireen Abdelqader Student Name: JUMAN S. AL

Instructor:
Sireen Abdelqader
Student Name:
Student ID #
Course Name
Course Code
Section
CRN:
Assignment Name
JUMAN S. AL-AGEEL
200901411
INTRODUCTION TO MACROECONOMICS
ECON 1311
204
1310
Assignment #1
Definitions and Short Answers
Instructions Complete the information required and
staple this Identifying Page to all out-ofclass-assignments.
Chapter 1:
 Economics: is the study of how the societies use their scarce resources to produce valuable
services and goods and how they distribute them amongst different individuals.
 Scarcity: is when goods are limited relative to desires.
 Efficiency: an economy has to make the best of its limited resources to satisfy people's wants
and needs with no waste at all.
 Economic efficiency: when an economy produces the highest combination of quantity and
quality of goods given its technology and its scarce resources.
 Microeconomics: a branch of economics which is concerned with the behavior of the individual
entities such as markets, firms and households.
 Macroeconomics: is concerned with the overall performance of the economy.
 Factors of production:
* land: natural resources
* labor: the human time spent in production
* Capital: machines, computers, softwares..
 Production possibility frontier: is a graph that shows the maximum quantity of goods that can
be efficiently produced by an economy, given its technological knowledge and the quantity of
valuable input.
 Opportunity cost: value of the good or services forgone.
 Productive efficiency: this occurs when an economy cannot produce more of one good without
producing less of another good.
Q1. Give two examples from your daily life of how goods are scarce?
 When going to a restaurant and you are hesitant of paying for an expensive lunch or eat
a salad and then have dessert.
 Choosing everyday whether I pay money for snacks at the university or keep my money
for something I want to buy later on.
Q2. give an example of a mixed economy in your country?
 A mixed economy occurs on our country like the oil company Aramco. Where it works as a
private sector but under the governments regulations.
Chapter 2:
 mixed economy: a combination of private enterprise working through the market place and
government regulations, taxation and its programs.
 Market: a mechanism through which buyers and sellers interact to determine prices and
exchange goods, services and assets.
 Price: value of the good in terms of money.
 Profits: net revenues or the difference between total sales and total costs.
 Money: means of payment in the form of currency and checks used to buy things.
 Capital: a produced and durable input which is itself an output of the economy.
 Perfect competition: when a market in which no firm or consumer is large enough to affect the
market price.
 Imperfect competition: it occurs when a buyer or a seller can affect a goods price.
 Externalities: this happens when people impose costs or benefits on others outside the
marketplace.
 Public goods: commodities that can be enjoyed by everyone with no exception.
 Laissez-faire: it means governments should not interfere in the economic affairs and leave the
economic decisions to the buyers and sellers.
 Welfare state: it is when markets direct the detailed activities of day-to-day economic life while
government regulates social conditions and pensions and healthcare for poor families.
Q1. Give real life examples from your life of perfect and imperfect competition?
Perfect competition occurs in the agriculture marketplace. Because farmers sell their products to
companies who need goods to be able to sell them directly to the buyers.
Imperfect competition occurs in the Electricity company in Saudi. Where they have control over the
electricity market (electricity is the good or service) because they have no competition and they are the
only providers.
Q2.
When different people specialize in the production of different goods, their interactions in
the market will lead to _______.
A) anarchy
B) a welfare state
C) capitalism
D) gains from trade
Chapter 3:
 Demand schedule: is the relationship between the market price and the quantity demanded of
that good.
 Demand curve: a graphical presentation of the demand schedule.
 Downward sloping demand: the price of a commodity is increased, consumers tend to buy less
of that commodity and vice versa.
 Substitution effect : it occurs when a good becomes relatively more expensive when its price
rises.
 Income effect: it is the change in an individuals income and how that change will impact the
quantity demanded of a good service.
 The market demand: it represents the sum total of all demands of the individuals.
 Average income: as income rises, people tend to buy more.
 Market equilibrium: occurs at the price when quantity demanded equals quantity supplied.
Q1. How do we use the supply and demand analysis correctly?
We should first distinguish a change in the demand or supply which produces a shift in the curve from a
change in the quantity demanded or supplied. Then, we hold all other things constant which requires
distinguishing the impact of a change in a commodity's price from the impact of changes in other
influences. Finally we look always for the supply and demand equilibrium.
Q2. How does the shift in the supply and demand curves change the equilibrium price and quantity?
An increase in demand shifts the demand curve to the right and will increase both equilibrium price and
quantity. While an increase in supply which shifts the supply curve to the right will decrease price and
increase quantity demanded.
Chapter 19:
 Macroeconomics: the study of the behavior of the economy as a whole.
 Economic growth: is the process when advanced economies generally exhibit a steady longterm growth in real GDP and improvement in living standards..
 GDP: is the measure of the market value of all final goods and services- cars, donkey rides and
so on- produced in a country during a year.
 Potential GDP: represents the maximum sustainable level of output that economy can produce.

A recession: is a period of significant decline in total output ,income and employment, usually
lasting more than a few months and marked by widespread contractions in many sectors of the
economy.

Depression: A severe and protracted downturn.

unemployment rate: measures the percent of the labor force that is seeking work.

Price Stability: is defined as a low and stable inflation rate

Price index: measures of the overall price level.

Consumer price index (CPI) : measures the trend in the average price of goods and services
bought by consumers.

The inflation rate: is the percentage change in the overall level of prices from one year to the
next.

Fiscal policy: refers to the use of taxation policy and government expenditures.

Monetary policy: uses the nations supply of money, credit and banking system to determine
short term interest rates, which in turn influences many financial and economic conditions.

Aggregate Supply: refers to the total quantity of goods and services that the nation’s businesses
willing produce and sell in a given period.

Aggregate demand: refers to the total amount that different sectors in the economy willingly
spend on goods and services in a given period.