Chapter 1

Question 1

What is the definition of economics (1) & what kind of situations can be addressed by its theories (2)?

Answer 1

1. A social science focused on how scarcity (limited economic resources) and unlimited human wants are forcing us to make choices or trade-offs.
2. Everyday situations like shoe shopping, running a hospital, business, etc..

Question 2

The distinction between Micro & Macro Economics.

Answer 2

Micro: the study of how individuals & firms manage resources
Macro: the study of the economy as a whole, & how policy-makers manage the growth & behavior of the overall company.

Question 3

What ceteris paribus, or all other things equal implies and how it is used in economic models

Answer 3

when analyzing the relationship between two variables, all other factors that could influence the outcome are held constant, allowing for a focused examination of the direct connection between the two variables of interest

It simplifies complex relationships.

Question 4

The four types/classifications of resources or factors of production in macroeconomics

Answer 4

1. Land ( Natural Resources):
   oil, soil, fresh water, etc.
2. Labor (Human Resources)(Human Capital)
   -Skilled: hard to replicate
   -Unskilled: easier to replicate
3. Capital (not $)
   tools, equipment, factories, “things
   that make other things”
4. Technology: new/better ways to combine other resources mentioned.

Question 5

The distinction between normative and positive statements.

Answer 5

Positive Statement: a factual claim about how the world actually works based on past experiences

Normative Statement: a claim about how the world should be (opinions or “norms”)