1.1

Question 1

What is the purpose of Economists?

Answer 1

To tackle complex issues concerning what is a very complex real world.

Question 2

What is an Economic Model?

Answer 2

A simplified representation of reality used to provide insight into economic decisions and events.

Question 3

What is Ceteris Paribus?

Answer 3

Other things being equal - used when we focus on changes in one variable when holding other items constant.

Question 4

Why is evaluating an economic model not always good?

Answer 4

It is not guaranteed to be realistic or accurate. It is to be used to predict future behaviour.

Question 5

Why do Economists use Positive and Normative statements?

Answer 5

They need to be objective in analysis, so the difference must be clear.

Question 6

What is a Positive Statement?

Answer 6

An objective statement about what is certain (factual evidence).

Question 7

What is a Normative Statement?

Answer 7

A subjective statement about what is ought to be (opinion on future).

Question 8

What is a Valued Judgement?

Answer 8

A judgement used in normative statements, based on opinions or beliefs, other than facts.

Question 9

What is an example of a Positive Statement?

Answer 9

“The air has oxygen in it” - can be verified with evidence.

Question 10

What is an example of a Normative Statement?

Answer 10

“Workers will be better off if the minimum wage is increased” - effects aren’t definite, it is a valued judgement.

Question 11

What is the Economic Problem?

Answer 11

When finite resources are scarce and our need exceed them.

Question 12

What is Scarcity?

Answer 12

A situation that arises when people have unlimited wants with limited resources.

Question 13

What is Opportunity Cost?

Answer 13

In decision making, the value of the next best thing forgone.

Question 14

What is Marginal Analysis?

Answer 14

An approach to economic decision making based on considering the marginal benefits and costs of a change in behaviour.

Question 15

What are the 3 Economic Agents?

Answer 15

• Consumers (People + Households)
• Producers (Firms)
• Government

Question 16

What is the role of Consumers?

Answer 16

Making spending choices demanding goods and services

Question 17

What is the role of Producers?

Answer 17

To produce and output goods and services

Question 18

What is the role of Government?

Answer 18

To fulfil roles in society such as taxation.

Question 19

What does Factors of Production mean?

Answer 19

Resources used in the production process; inputs into production, particularly including land, labour, capital, enterprise.

Question 20

What is Labour?

Answer 20

The work done by humans to produce goods.

Question 21

What is Land?

Answer 21

Where production happens.

Question 22

What is Capital?

Answer 22

Resources used in the production of goods.

Question 23

What is Enterprise?

Answer 23

Bringing the other factors together for a profit.

Question 24

What are Renewable Resources?

Answer 24

Natural resources that can be replenished, such as forests that can be replanted, or solar energy that does not get used up.

Question 25

What are Non-Renewable Resources?

Answer 25

Natural resources that, once used, cannot be replenished such as coal or oil.

Question 26

What is “What” in the economic questions?

Answer 26

What goods and services should be produced in a society from its scarce resources.

Question 27

What is “Whom” in the economic questions?

Answer 27

How should produced goods and services be allocated amongst the population for consumption.

Question 27

What is “How” in the economic questions?

Answer 27

How should the productive resources of the economy be used to produce these goods and services.