CHAPTER 1 (NATURE AND SCOPE)

Question 1

What is positive economics?

Answer 1

Positive economics focuses on facts and cause-effect relationships. It is a statement of fact which accuracy can be tested by appealing to the facts.

Question 2

What is Normative Economics?

Answer 2

Value judgements about economic issues. Includes subjective statements that are impossible to verify or test.

Question 3

What is microeconomics?

Answer 3

Branch of economics that is concerned with individual parts of the economy

Question 4

What are macroeconomics?

Answer 4

Study of the economy as a whole (national, regional, global)

Question 5

Define Opp Costs

Answer 5

Opportunity costs refer to the value of the next best alternative forgone due to a decision made.
It is usually measured in terms of goods and services or monetary value of what is given up.

Question 6

What is the Central Economic Problem?

Answer 6

Scarcity, arising from limited resources and unlimited wants. Available goods and services are limited and are insufficient to fulfil the unlimited wants and needs of society.

Question 7

What is the acronym for economic resources?

Answer 7

Capital
Entrepreneurship
Labour
Land

Question 8

What are economic goods?

Answer 8

Economic goods are tangible outputs that can be categorised into producer and consumer goods.

Question 9

What are the points on the PPC?

Answer 9

On PPC :Show productively efficient resource utilisation. Only one pt on PPC is allocative efficient
Inside PPC: Attainable but inefficient, wastage of idle resources.
Outside PPC: Desired but unattainable (w. economy’s present productive capacity)

Question 10

Why does the PPC slope downwards?

Answer 10

The PPC tends to slope downwards from left to right due to the scarcity of resources. To produce more of one good, economy has to give up some units of the other good because of limited resources.

Question 11

Describe Movement of PPC

Answer 11

1. If econ move from inside PPC to on PPC, more goods can be produced w/o opp cost.
2. If econ move from a point on PPC to another point on PPC, increased output of one good is at expense of decreased output of the other. Hence opp cost incurred.

Question 12

Define shortage and surplus.

Answer 12

Shortage: excesss-QTY demanded > Quantity supplied
Surplus: excess-QTY demanded <Quantity supplied.