Chapter 1 - What is economics

Question 1

CH1 Example of a normative statement?

Answer 1

Government cuts in welfare spending impose an unfair hardship on the poor.

Question 2

CH1 Example of a positive statement

Answer 2

Low rents restrict the supply of housing

Question 3

CH1

1-“What?”
2-Example of “ what” question

Answer 3

1- resource allocation

2-A textile firm decides to produce more silk fabric and less cotton fabric

Question 4

CH1 An economic model

Answer 4

_ tested by comparing its predictions w/ facts
_ having some aspect of the economic world that includes only those features needed on purpose at hand
_ should be
>explicit about their assumptions
>testable
>reproducible

Question 5

CH1 Factor of production earns the most income

Answer 5

Labour

Question 6

CH1 To disentangle cause and effect, economists use economic models and 3 things:

Answer 6

• natural experiments,
• statistical investigations
• economic experiments

Question 7

CH1

1- How?
2-Example of “how” question

Answer 7

1-land, labour, capital, entrepreneurship
2-To meet increased demand for its good, a firm decides to hire a few high-skilled workers, rather than hire many low-skilled workers.

Question 8

CH1

1- For whom
2- Example of “for whom” question

Answer 8

1-incomes earned from land, labour, capital,
and entrepreneurship determine who
consumes the production
2-A star athlete can afford a garage full of exotic cars while other people can only afford to take a city bus for transportation.

Question 9

difference of cost and price.

Answer 9

Cost refers to the amount of money spent over different activities to make or maintain service or product whereas Price as told earlier, implies future acquisitions of the service or product.
Price and Cost refer to the element of the money. In price, money will be used to gain something. Whereas, the cost will be referred to the money in the production or manufacturing process like wages, labor, materials, capital, bills, and other transaction costs.