Introduction

Question 1

What does economics study?

Answer 1

Economics studies the choices taken under conditions of scarcity and uncertainty

Question 2

What is microeconomics the study of?

Answer 2

This is economics at the individual, industry, or household level.

Question 3

What is a positive statement?

Answer 3

A statement that can be tested, proved, and/or amended due to evidence

Question 4

What is a normative statement?

Answer 4

A subjective statement (based on personal feelings/opinions)

Question 5

What are the three assumptions that micro economists make?

Answer 5

Rational consumers want to maximise SATISFACTION
from the products they purchase.
Companies wish to maximize PROFITS by
producing goods at the lowest cost.
The government operates in the best interests of its
citizens by improving the economic and social
WELFARE of citizens

Question 6

Define opportunity cost.

Answer 6

Opportunity cost measures the cost of a choice compared to the next best option. (Whether alternatives would be better)

For example, If you go out for food, the opportunity cost is that you didn’t put that money into savings.

On a more macro scale, if you use land for agriculture and farming, you can’t then also use that land for education or healthcare.

Question 7

What are the factors of production? (4)

Answer 7

Land
Labour
Enterprise
Capital

Question 8

Elaborate on land.

Answer 8

The scarce, physical natural resources available for production.

Question 9

What is labour?

Answer 9

The human input to create goods.

Question 10

What is enterprise?

Answer 10

The people who OWN the companies that manufacture the goods.

Question 11

What is capital?

Answer 11

The goods used in the supply of other products.
i.e. technology, machinery, etc.