First Monthly

Question 1

Goods

Answer 1

All physical objects people need and want

Question 2

Services

Answer 2

All non-physical activities people need and want

Question 3

Resources

Answer 3

The inputs used to produce goods and services wanted by people, also known as FACTORS OF PRODUCTION

Question 4

Scarcity

Answer 4

The heart of economics theory; the condition in which available resources are limited, they are not enough to produce everything that human beings need and want.

Question 5

Choices

Answer 5

The conflict between unlimited wants and scarce resources
Economics is a study of choices, or selecting among alternatives, due to the scarcity of resources

Question 6

Economics

Answer 6

The study of choices leading to the best possible use of scarce resources in order to best satisfy unlimited human needs and wants.

The choices made by economists generate positive and negative outcomes, these outcomes affect the relative well-being of individuals and societies. As a social science, economics examines these choices through the use of models and theories.

Question 7

Microeconomics

Answer 7

1. Examines the behaviour of individual decision-making units
2. Choices made at the level of producers and consumers in individual markets
3. microscope point of view

Question 8

Macroeconomics

Answer 8

1. Examines the economy as a whole to obtain a broad picture of the economy.
2. Choices made at the level of the government and the national economy
3. telescope point of view

Question 9

What to produce

Answer 9

what particular goods and services and what quantities of these they wish to produce.

Question 10

How to produce

Answer 10

how to use resources to produce goods and services

Question 11

For whom to produce

Answer 11

How the goods and services produced are to be distributed among the population.

Question 12

Sunk Cost

Answer 12

The cost that has already been occurred in that past that cannot be recovered

Question 13

Opportunity cost

Answer 13

The value of the next best alternative that must be given up or sacrificed in order to obtain something else.

It is the real cost

Question 14

Trade-offs

Answer 14

requires opportunity cost

Question 15

Government Trade-offs

Answer 15

1. trade-off between “guns and butter.”
2. trade-off between a clean environment and a high rate of economic growth and high level of income.

Question 16

Free good

Answer 16

Any good that is not scarce (zero opportunity cost)

Question 17

Economic good

Answer 17

Any good that is scarce (opportunity cost greater than zero)

Question 18

Free market economy

Answer 18

based on the market approach

Question 19

Planned economy

Answer 19

based on the command approach;
- An economy where all economic decision-making is carried out by government planning rather than reliance on prices determined by the market, to be contrasted with free market economy.

Question 20

Mixed economy

Answer 20

What most real worlds are implementing;
Any economy that combines the command approach with the market approach to resource ownership, decision making and rationing.

Question 21

Ceteris Paribus

Answer 21

Assumption in economic model building, means “other things equal” in latin, Excepting the variables we are studying, everything else does not change.
2. The aim is to isolate the effect of each one of the variables.

Question 22

Economists

Answer 22

Plays different roles;
1. as a scientist, make positive statement to describe and explain how economy actually works.
2. as a policy advicer, make normstive statements to advice how things ought to work.

Question 23

Positive Statement

Answer 23

Objective and Descriptive
may be true or false

Question 24

Normative statement

Answer 24

Subjective and Prescriptive
Cannot be true or false, it can only be assessed relative to beliefs and value judgement.

Question 25

PPC/PPF model

Answer 25

The production possibilities curve (production possibilities frontier) model
Used to show the concept of scarcity, choice, opportunity cost and a situation of unemployed resources and inefficiency.
Conditions:
All resources must be fully employed and used efficiently.

Question 26

PPC illustrations

Answer 26

represents all combinations of the maximum amounts of two goods that can be produced by an economy

Question 27

PPC in the real world

Answer 27

In the real world, no economy is ever likely to produce on its PPC.

Question 28

PPC Slope

Answer 28

In PPC, the opportunity cost equals the slope
slope = ∆y/∆x
It shows how much one variable responds to changes in another variable

Question 29

Bowed shape

Answer 29

Due to specialization of factors of production, which makes them not equally suitable for the production of different goods and services, the opportunity cost is not constant
DESCRIBE AS relatively flat/relatively steep

Question 30

Demand

Answer 30

the behaviour of buyers;
Definition: the various quantities of a good that consumers are willing to and able to buy at different possible prices during a particular time period

Question 30

Market classification

Answer 30

Local market
National market
International market
Product market
Resource market

Question 30

Demand schedule

Answer 30

Concentrate only on the relationship between the quantity of a good the consumer is willing and able to buy and its Price.

Question 31

The law of demand

Answer 31

The negative causal relationship between price and quantity demanded.

Question 32

Utility

Answer 32

satisfaction that consumers gain from consuming something.

Question 33

Total Utility

Answer 33

Total satisfaction that consumers get from consuming something.

Question 34

Marginal utility

Answer 34

Extra satisfaction that consumers receive from consuming one more unit of a good.

Question 35

Demand curve/Marginal Benefit (MB) Curve

Answer 35

slope downwards

Question 36

Market Demand

Answer 36

The sum of all individual demands for one good.

Question 37

Non-price determinants of demand(8)

Answer 37

the variables other than price that influence demand
1. normal goods
2. inferior goods
3. income
4. preference and taste
5. expectation
6. prices of substitute goods: two goods that satisfy a similar need, so that one good can be used to replace the other.
7. price of complementary goods: two goods that tend to be used together
8. Population

Question 38

Total Revenue

Answer 38

is the amount of money received by firms when they sell a good (or service) and is equal to the price (P) of the good times the quantity(Q) of the good sold.

Question 39

Normal Good

Answer 39

goods and services for which demand increases as consumers’ income increases and for which demand goes down when income is lower

Question 40

Inferior Good

Answer 40

a good that experiences a drop in demand when incomes rise

Question 41

Determinants of PED (6)

Answer 41

1. Number of Substitutes
2. Closeness of substitutes
3. The definition extent of the goods
4. Necessities versus Luxuries
5. Length of time
6. Proportion of income spent on a good

Question 42

Demand

Answer 42

The behavior of buyers.
It indicates the various quantities of a good that consumers(or a consumer) are willing and able to buy at different possible prices during a particular time period, ceteris paribus.