1_IntroductionToEconomics

Question 1

Economics

Definition

Answer 1

the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses

Question 2

Scarcity

Answer 2

Available resources are insufficient to satisfy all desires

Question 3

Resources

Answer 3

include time and talent people have available, buildings and equipment (capital), natural resources (land, water, oil,…), knowledge

Question 4

Without scarcity

Answer 4

without scarcity and/or alternative uses of the available resources there is no economic problem

Question 5

Microeconomics

Answer 5

How do agents make their decisions and how do agents interact?

• Looks at specific markets, e.g. suppy and demand
• Studies behaviour of individuals, e.g. experimental economics
• Looks at specific environmental problems and how to solve them, e.g. environmental economics

Question 6

Macroeconomics

Answer 6

(based on microeconomics)

• Relation between GDP, inflation, unemployment
• Relation between money supply and demand and GDP
• Exchange rates
• Economic growth theory

Question 7

Product function

Answer 7

Production is a process in which factors of production (inputs) are combined and coordinated to produce some outputs (Y) (goods and services)

Example: Wheat production

• Needs land (A), capital (K), labour (L) and some other things
• To keep it simple, we assume we need labour and land (which is fixed) -> Y = f(L,Ä)