1.1 What is economics

Question 1

Purpose Economics

Answer 1

Economics is devoted to solving the problem of scarcity.

Question 2

MicroEconomics

Answer 2

The study of specific markets.
- Motivational/general rules that guide buyers/sellers in the markets.
- Concept of supply and demand and equilibrium prices.

Question 3

Trade-off

Answer 3

Trade off= What you give in order to receive

Question 4

Opportunity cost

Answer 4

Opportunity Costs= Next best alternative not chosen.

Question 5

What are the 3 fundamentals of Economics

Answer 5

1. HOW( its made)
2. WHAT(will be made)
3. WHO(its made for)

Question 6

The key concepts

Answer 6

1. Scarcity
2. Choice
3. Efficiency
4. Equity
5. Economic well-being
6. Change
7. Interdependence
8. Intervention
9. Sustainability

Question 7

Scarcity(Key concepts)

Answer 7

Refers to the limited materials of economic resources relative to society’s unlimited demand for goods and services

Question 8

Choice(Key concepts)

Answer 8

Economics needs to make choices between competing alternatives. Economics studies the consequences of choices such as opportunity cost

Question 9

Efficiency(Key concepts)

Answer 9

It is a quantifiable concept determined by the ratio of useful output to total input. Allocative efficiency refers to making the best possible use of scarce resources to produce the optimum combination of goods and services minimizing resource waste.

Question 10

Equity(Key concepts)

Answer 10

Refers to fairness in income distribution, this can involve different treatments based on their needs.

Question 11

Economic Well-being(Key concepts)

Answer 11

Relates to the property and quality of life enjoyed by members of an economy, include:
- Present and future financial security
- ability to meet basic needs
- Ability to make economic choices and achieve personal satisfaction.

Question 12

Change(Key concepts)

Answer 12

Focuses not on the level of the variable but on their change from one situation to another.

Question 13

Interdependence(Key concepts)

Answer 13

Refers to the idea that economic decision-makers interact with and depend on each other – no one is self-sufficient

Question 14

Intervention(Key concepts)

Answer 14

When the government intervenes in the working markets where those markets fail to achieve society’s goals.

Question 15

Sustainability(Key concepts)

Answer 15

Meeting the needs of the present generation without compromising the ability of future generations to meet their needs.

Question 16

Factors of production

Answer 16

• Lands
• Labour
  -Capital
• Entrepreneurship

Question 17

Land(factors of production)

Answer 17

Resources such as soil (for food growth), wood, minerals, etc are in high demand but are all in limited supply.

Question 18

Labor (factors of production)

Answer 18

The human resources used to produce a good/service. It is human work (physical and intellectual)

Question 19

Capital(factors of production)

Answer 19

The tools/techniques needed to produce a good/service we desire.
Can also be referred to as money

Question 20

Entrepreneurship (factors of production)

Answer 20

The innovation/creativity applied in the production of goods/services.

Question 21

Free Good

Answer 21

Can easily satisfy our needs
- Has almost zero economic cost
- As time continues it becomes more scarce
- usually (oxygen, sea, water, etc)

Question 22

Economic Good

Answer 22

Has some cost to society.

Question 23

Types of economies

Answer 23

-Free market economy
- Planned economy
- Mixed economy
- Traditninal economy

Question 24

Free market economy

Answer 24

Mostly in democracy
- COnusmers control who, what, and how (consumer sovereignty)
- producer can sell and consumer can buy anything.

Question 25

Advantages a free market economy

Answer 25

• Markey system is free
• when the market fosters competition, firms can improve products.
• Consumer dominate (vote with purchases)
• An open system depends on self-interest (the price system has more accurate information about the scarcity of resources for buyers/consumers).

Question 26

Disadvantages to free market economy

Answer 26

• Markets can be dominated by monopoly (interests stifle competition and raise prices for all)
• public good( national defense, streetlights etc) are not produced.
• Dermit goods (products harmful to society) will be overproduced
• merit goods (products that are positive for society) will be underproduced.
• extreme gaps between the rich and poor.

Question 27

Planned economy

Answer 27

• mostly in dicatorships/comunism
• govorment controls who,what,how.
• iinflux of supplies in the amrket.

Question 28

Advantages to planned economy

Answer 28

• countries that value equity can provide resources to the poor.
• countries can minimise income gaps by paying equalised wages across labour market.
• state can establish priorities and more economy in that direction.

Question 29

disadvantages to planned economy

Answer 29

• entrepreneurship is reduced due to the system rewarding individuals’ productivity poorly.
• state control kills competition(removes incitive to find efficiency, lower costs, and improve products).
• citizens have little freedom of choice in their work, housing location, etc.

Question 30

Mixed economy

Answer 30

• mostly communism
  -3 parties control the market, government, consumers, and producers.

Question 31

Advantages to mixed economy

Answer 31

• soultiton to market failure is managed on a case by case basis, not bound to ideology.
• gov can use tax-revenues to support underproduced merrit goods(education, healthcare, etc.)
• gov can provide popular goods/services but also limit dermit goods.
• balance dynamic market forces and gov support can increase overall well-being.

Question 32

disadvantages to mixed economy

Answer 32

• potential for social division over allocation of resources and tax rates.
• can have political conflict over role of gov in controlling production/consumption.