Micro 1

Question 1

Normative statement

Answer 1

Subjective statements based on value judgements and opinions.

Question 2

Possibility production frontier (PPF)

Answer 2

Depicts the maximum productive potential of an economy using the comvination of two goods or services.

Question 3

Non renewable resources

Answer 3

Resources which cnnot be readily replenished or replaced at a level equal to consumption.

Question 4

Renewable resources

Answer 4

Resources which can be readily replenished.

Question 5

Economic problem

Answer 5

The problem of scarcity: wants are unlimited but resources are finite

Question 6

Scarcity

Answer 6

The shortage of resources in relation to the quantity of human wants

Question 7

Capital goods

Answer 7

Goods produced in order to aid production of consumer goods

Question 8

Capital

Answer 8

One of four factors of production; goods which can be used in the production process

Question 9

Ceteris paribus

Answer 9

All other things remaining the same

Question 10

Social science

Answer 10

The study of societies and human behavior

Question 11

Consumer goods

Answer 11

Goods bought and demanded by households and individuals

Question 12

Division of labour

Answer 12

When a firm splits up its production process into smaller seperate tasks and assigns different workers to each of these tasks

Question 13

Diminishing marginal utility

Answer 13

The extra benefit gained from consumption of a good generally declines as extra units are consumed

Question 14

Enterprise

Answer 14

One of the four factors of production; the willingness and ability to take risks and combine the three other factors of production.

Question 15

Land

Answer 15

One of the four factors of production; natural resources

Question 16

Mixed economy

Answer 16

Both the free market mechanism and the government allocates resources

Question 17

Opportunity costs

Answer 17

The value of giving up the next best alternative

Question 18

Efficiency

Answer 18

When resources are allocated optimally

Question 19

Command economy

Answer 19

All factors of production are allocated by the state, so they decide what, how and for whom to produce goods

Question 20

Habitual behavior

Answer 20

A cause of irrational behavior; when consumers are in the habit of making certain decisions

Question 21

Rationality

Answer 21

Decision making that leads to economic agents maximising their utility

Question 22

Specialisation

Answer 22

When a worker, firm or economy concentrates on producing a limited range of goods and services

Question 23

Weakness of computation

Answer 23

A cause of irrational behavior; when consumers are bad at estimating future benefits/costs

Question 24

Free market

Answer 24

An economy where the market mechanism allocates resources so consumers and producers make decisions about what is produced, how to produce and for whom

Question 25

Model

Answer 25

A hypothesis which can be proven or tested by evidence

Question 26

Labour

Answer 26

One of the four factors of production; human capital

Question 27

Positive statement

Answer 27

Objective statements which can be tested with factual evidence to be proven or disproven

Question 28

Utility

Answer 28

The satisfaction derived from consuming a good.