Introduction to micro

Question 1

The economic problem

Answer 1

a situation whereby an individuals wants are unlimited, the resources needed to fulfil these wants are scarce- this scarcity necessitates choice

Question 2

opportunity cost

Answer 2

the value of the next best alternative forgone

Question 3

factors of production

Answer 3

the things that are needed to make a good or service (CELL)

Question 4

capital (FoP)

Answer 4

man-made resources

Question 5

Enterprise/Entrepreneurship (FoP)

Answer 5

the individual or firm that combines all the FoP’s in pursuit of profit, while taking a risk

Question 6

Land (FoP)

Answer 6

natural resources involved in the production process

Question 7

Labour (FoP)

Answer 7

all human input in the production process

Question 8

factor reward

Answer 8

the incomes that flow into each FoP when they’re bought for productive use

Question 9

the factor reward for each FoP

Answer 9

capital = interest
Enterprise = profit
Land = rent
Labour = wages

Question 10

The stages of production

Answer 10

Primary: obtaining raw materials
Secondary: transform raw materials into manufactured materials
Tertiary: providing a service

Question 11

microeconomics

Answer 11

the study of economics at the level of the individual firm, industry or consumer/household

Question 12

positive statements

Answer 12

objective statements that can be tested, amended or rejected by referring to available evidence

Question 13

normative statements

Answer 13

subjective statements which are based on opinion

Question 14

The assumed objective of rational consumers

Answer 14

wish to maximise their utility from consumption

Question 15

the assumed objective of producers and firms

Answer 15

wish to maximise profit

Question 16

the assumed objective of the government

Answer 16

wish to improve the social and economic welfare of citizens

Question 17

capital goods

Answer 17

goods that are used to make consumer goods and services, or other capital goods

Question 18

consumer goods

Answer 18

goods and services which are bought, providing utility

Question 19

free goods

Answer 19

have no opportunity cost associated with their production and consumption

Question 20

economic goods

Answer 20

have an opportunity cost associated with their production and consumption