Chapter 1

Question 1

Positive economics

Answer 1

Can be tested and verified, not based on value judgement

Question 2

Normative economics

Answer 2

Cannot be tested and verified, based on value judgement

Question 3

Scarcity

Answer 3

occurs when there is an excess of human wants over what can actually be produced to fulfill these wants

Question 4

Economic goods

Answer 4

Goods that are produced using scarce resources. They are limited in quantity and relative to demand. Hence, consumption of such goods involve an opportunity cost

Question 5

Opportunity cost

Answer 5

The value of the next best alternative forgone as a result of a decision made

Question 6

Production possibility curve (PPC)

Answer 6

shows the maximum combinations of 2 goods a country can produce given a constant state of technology and that its limited resources are fully employed

Question 7

Principal of comparative advantage

Answer 7

states that trade can benefit all countries, if each country specialises in the production of goods in which it has the lowest opportunity cost