lecture 1 Flashcards
What do economists study?
Microeconomic choices, macroeconomic environment, techniques of economic analysis
Economists analyze how individuals and firms make decisions regarding resource allocation.
Define scarcity in economics.
The problem of having limited resources to meet unlimited wants
Scarcity forces individuals and firms to make choices about resource allocation.
What are the factors of production?
- Human resources (labour)
- Natural resources (land and raw materials)
- Manufactured resources (capital)
These factors are essential for producing goods and services.
What is the role of firms in economics?
Satisfying demand through production and supply
Firms analyze market demands to produce goods that meet consumer needs.
What is the difference between actual and potential demand?
Actual demand refers to the current market demand, while potential demand indicates the maximum demand under ideal conditions
Understanding both helps firms in strategic planning.
What are microeconomic choices?
Decisions made by individuals or firms regarding the allocation of resources
These choices often involve trade-offs and opportunity costs.
What does the concept of opportunity cost mean?
The value of the next best alternative forgone when making a decision
Opportunity cost is a key principle in economics, influencing decision-making.
What is the circular flow of income?
A model depicting the flow of money and goods between households and firms
It illustrates how income circulates through the economy.
In the circular flow of income, what do firms provide to households?
Goods and services
Firms produce goods using factors of production provided by households.
What is consumer expenditure?
The total amount spent by households on goods and services
It is a crucial component of the circular flow model.
What are the two main types of economic analysis?
- Microeconomic analysis
- Macroeconomic analysis
Each type focuses on different aspects of the economy.
What does differentiation in economics help determine?
The slope of a curve and maximum or minimum points
It is a mathematical technique used in economic analysis.
How do you find the maximum point of a curve?
Differentiate the equation and set it equal to zero
This method identifies critical points where maximum or minimum values occur.
What is the second derivative test used for?
To determine whether a critical point is a maximum or minimum
If the second derivative is negative, the point is a maximum; if positive, it’s a minimum.
Fill in the blank: The government spends more than it receives in _______.
tax revenue
This situation can lead to budget deficits and affect macroeconomic stability.
True or False: Unemployment rises when the economy is booming.
False
Typically, unemployment decreases during economic growth.
What is the significance of marginal costs and benefits in microeconomics?
They help in making rational choices by comparing additional costs and benefits of actions.
Understanding these concepts is crucial for firms in decision-making.
What happens to the graph of a function if it changes from y = 4 + 2x to y = 6 + 2x?
The line would shift upwards
Changes in the constant term affect the vertical position of the line.
