chp 5

Question 1

microeconomics

Answer 1

the study of the behavior and decisions of households and firms and the performance of individual markets

Question 2

macroeconomics

Answer 2

the study of the whole economy

Question 3

market

Answer 3

An arrangement which brings buyers into contact with sellers

Question 4

Microeconomics examples

Answer 4

Why do individuals buy more of a particular product when it’s price falls?
Why do star football players get paid huge wages?

Question 5

Macroeconomics questions

Answer 5

Why has indias economic growth increased above that of China in recent years

Question 6

Explain how each of the following situations can involve microeconomic and macroeconomic concepts:

i) a rise in the price of imported Chinese television sets in Malaysia

ii) a reduction in the rate of interest in Malaysia.

Answer 6

Sample answer:
oi) A rise in the price of imported Chinese televisions will lead to a fall in the quantity demanded (micro). Consumers will be likely
to switch to locally manufactured televisions as these will now be relatively cheaper (micro).
This will likely increase employment in Malaysian manufacturers (macro) and increase the surplus in the balance of trade (macro).
i) A reduction in the rate of interest in Malaysia will increase the funds available for lending to consumers (macro). Consumers will now purchase ‘big ticket’ items such as televisions and cars (micro). This will increase total demand (macro) and if these are produced in Malaysia, there will be an increase in employment in these industries (macro).

Question 7

1) Give an example of a microeconomics issue and a macroeconomic issue that is currently affecting your household

Answer 7

Microeconomics issue - an increase in goods and services tax on chicken meat has increased the cost of the weekly shopping

Macroeconomics issue - recession has reduced the number of job opportunities for school leavers

Question 8

Give four examples of markets

Answer 8

• the market for mobile phones
• the labor market
• the foreign exchange market
• the market for coffee beans

Question 9

Economic agents

Answer 9

Those who undertake economic activities and make economic decisions

Question 10

I) give two examples of macroeconomic decisions that have to be taken by a government

Oi) explain whether the decision in each case involves opportunity cost

Answer 10

Whether to reduce indirect taxes to boost total demand.
Whether to impose a tariff on some imported goods to reduce a balanc dog payment deficit.

The opportune cost:

Reducing direct taxes to increase total demand - the best alternative foregone

Imposing a quota on certain imports as the best alternative forgone for reducing a balance of payment deficit

Question 11

The government of Qatar fixes the wages of migrant labor on government’s construction projects. Which branch of economics is this

Answer 11

Microeconomics with some macroeconomic

Question 12

Opportunity cost

Answer 12

The best alternative that is foregone

Question 13

Which economic agents influence food prices in Pakistan

Pakistan households? Pakistan farmers? Pakistan government?

Answer 13

Yes
Yes
Yes