Chapter 2 Econ

Question 1

Scientific Method:

Answer 1

the dispassionate
development and testing of theories on the
workings of the universe.

Question 2

Assumption

Answer 2

is used to simplify complexity of the
world.
* Example: To study consumption behavior,
we may assume there are only two goods.
Unrealistic, but will give a valuable insight on
consumption behavior.

Question 3

Circular-Flow Diagram

Answer 3

is diagram that visualizes the
organization of the economy

Question 4

Factors of production

Answer 4

are the inputs that are necessary
for production such as land, labour and capital

Question 5

Production Possibilities Frontier (PPF)

Answer 5

is a
graph that represents all the possible
combinations of goods the economy can
produce.