Introduction

Question 1

Why study econcomics?

Answer 1

1. Economics is interesting and useful
2. Economics is essential for us to participate in modern society.
3. Economics will make you more enmployable
4. You can work for bug companies or governments

Question 2

What is offshoring?

Answer 2

Offshoring

Question 3

What arre the three main ways of presenting econonmic data?

Answer 3

1. Descriptive prose.
2. Tables of numbers that can be used to identify trends or points of note.
3. Graphs of key indicators and measures.

Question 4

What are the three economic assumptions about people?

Answer 4

1. That people are rational.
2. That people respond to economic incentives.
3. That people make optimal decisions at the margin.

Question 5

What are the three questions a society faces?

Answer 5

1. What goods and services will be produced?
2. How will the goods and services be produced?
3. Who will receive the goods and services produced?

Question 6

What is normative economic analysis?

Answer 6

Normative economic ananlysis is the determination of what is fair.

Question 7

What is postitive economic analysis?

Answer 7

Postitive economic analysis is concerned with what is. (What’s so)

Question 8

What is Microeconomics?

Answer 8

Microeconomics is the study of how induvudal choices are made by households.

Question 9

What is macro economics?

Answer 9

Macro economics is the study of the economy as a whole.

Question 10

What should you always look for when studying an economic model?

Answer 10

1. The assumption be they explicit or implicit
2. The logical reasoning used
3. The conclusions reached

Question 11

What is opportunity cost?

Answer 11

Opportunity cost is the value of that which must be given up to aquire or achieve something. (opportunity cost is expresed in terms of what has been given up)

Question 12

What is a market?

Answer 12

A market is a group of buyers and sellers of a good or service and the institution or arrangment by which they come together to trade.

Question 13

What is a product market?

Answer 13

A product market is is a market for goods and services.

Question 14

What is a factor market?

Answer 14

A factor market is a market for the factors of production such as labour, capital, natural resources and entrepreneurial ability.

Question 15

What is a free market?

Answer 15

A free market is a market with few governement imposed restrictions on how a good or service can be produced or sold or on how a factor of production can be employed.

Question 16

What is market mechanism?

Answer 16

The market mechanism refers to the inherent forces in the market that will allocate resources in a way that mazimises consumer satisfaction. (Adam Smiths invisible hand - the idea that consumers shape the market and producers make consumers what they want so they can maximise profits)

Question 17

What is the price mechanism?

Answer 17

The price mechanism is the signalling device between consumers and producers. (if consumers are willing to pay more because of demand this will signal suppliers to supply more)

Question 18

What is an entrepreneur?

Answer 18

An entrepreneur is someone who operates a business bringing together the factors of production - labour, capital and natural resources - in order to produce goods and services.

Question 19

What is the PPC?

Answer 19

The PPC (production possibility curve) is a tool used to examine the consequences of production initiatives, changes in the resource mix and developments in technology. It is an economic model.

Question 20

What is specialisation?

Answer 20

Specialisation is the cornerstone of the modern economy. The principle is that it is theoretically more efficient to specialise in production and then exchange or trade than to try and be fully self sufficient.

Question 21

What does marginal mean in economics?

Answer 21

Additional or extra

Question 22

What does it mean to say Optimal decisions are made at the margin?

Answer 22

It means decisions get made to do a little more or a little less, not in a birds eye view lump sum. (For example, we decide to have one more beer, not that we will drink 10 beers that night). Rational people will perform an action as long as marginal benefit is greater than or equal to margional cost.

Question 23

What is thinking at the margins net benefit?

Answer 23

Net benefit = total benefit - total cost

Question 24

What is scarcity in economics?

Answer 24

The concept that we operate with limited resources and can’t have everything we want. (You can’t buy what you want at any time, you can’t learn what you want at any time) Scarcity and trade-offs are unavoidable.

Question 25

What is the “ceteris Paribus assumption?

Answer 25

It is the assumption that everything else apart from the two things we are studying remain the same.

Question 26

What is correlation?

Answer 26

If two variables tend to change together they are coirrelated.

Question 27

What is causation?

Answer 27

A change in one varable produces a change in the other variable.

Question 28

What is PPF?

Answer 28

PPF is a curve showing the maximum attainable combinations of two goods that can be produced with available resources and current technology.

Question 29

What are Production possibility frontiers?

Answer 29

A way of modeling the trade-offs faced by firms or economies.