Microeconomics Scarcity and Choice

Question 1

Scarcity

Answer 1

a situation that arises because people have unlimited wants in the face of limited resources

Question 2

Opportunity cost

Answer 2

in decision making, the value of the next best alternative forgone

Question 3

Factors of production

Answer 3

resources used in the process; inputs into production, including labour, capital, land, and entrepreneurship

Question 4

Model

Answer 4

a simplified representation of reality used to provide insight into economic decisions and events

Question 5

Production possibility curve (PPC)

Answer 5

a curve showing the maximum combinations of goods or services that can be produced in a set period of time given available resources

Question 6

Economic growth

Answer 6

an expansion in the productive capacity of the economy

Question 7

Gross domestic product (GDP)

Answer 7

a measure of the economic activity carried out in an economy during a period

Question 8

Division of labour

Answer 8

a process whereby the production procedure is broken down into a sequence of stages, and workers are assigned to particular stages

Question 9

Market

Answer 9

a set of arrangements that allow transactions to take place

Question 10

Microeconomics

Answer 10

the study of economic decisions taken by individual economic agents, including households and firms

Question 11

Macroeconomics

Answer 11

the study of the interrelationships between economic variables at an aggregate (economy-wide) level

Question 12

Positive statement

Answer 12

a statement about what is, i.e. about facts

Question 13

Normative statement

Answer 13

a statement involving a value judgement that is about what ought to be