Economic Methodology And The Economic Provlem

Question 1

Ceteris Paribus

Answer 1

All other factors remain the same

Question 2

Positive Statements

Answer 2

Factually based comments that can be tested

Question 3

Normative Statements

Answer 3

Subjective comments that are difficult to test

Question 4

Fundamental Economic Problem

Answer 4

Scarcity

Question 5

Central purpose of economic activity

Answer 5

Satisfy needs and wants of society

Question 6

Factors Of Production And Their Rewards

Answer 6

Land-Rent
Labour-Wages
Capital-Interest
Enterprise-Profit

Question 7

Land

Answer 7

All of the natural resources that come from the earth used in production

Question 8

Labour

Answer 8

Includes all of the workforce in the economy

Question 9

Capital

Answer 9

Man-made aids that are used in the production process

Question 10

Enterprise

Answer 10

The entrepreneur taking land, labour and capital and organising them to produce products that will be profitable

Question 11

Economic Problem

Answer 11

Finite resources available to supply infinite wants

Question 12

Price Mechanism

Answer 12

The medium through which scarce resources are allocated

Question 13

Opportunity Cost

Answer 13

The benefits foregone of the next best alternative when making a choice

Question 14

Production Possibility

Answer 14

The maximum possible combination of output of two products

Question 15

Demand

Answer 15

The amount of a good or service consumers are willing and able to buy at a point in time

Question 16

Normal Good

Answer 16

If price rises demand will fall

If price falls demand will rise

Question 17

Veblen Good

Answer 17

Consumers pay more for certain products as their price increases
‘Snob effect’

Question 18

Inferior Good

Answer 18

Demand decreases as incomes increase

Question 19

Substitute Products

Answer 19

Goods that act as an alternative for consumers

Question 20

Complementary Products

Answer 20

Goods often bought alongside each other