Nature & Scope

Question 1

What is a positive statement?

Answer 1

Statement on economics that is proven by facts

Question 2

What is a normative statement?

Answer 2

Statement on economics that is based on opinions

Question 3

What are the 7 main types of factors that can be considered in a Decision-Making Process?

Answer 3

Benefits
Costs
Intended Consequences
Unintended Consequences
Information
Perspectives
Limitations/Effectiveness

Question 4

What is the answering format of a DMM question?

Answer 4

Body paragraph x2 if <9 marks, x3/4 if >9 marks:

• Point: [party] should/might have considered [factor] when [decision], like [eg of factor]
• Explain the example using economic rigour [SOL, affordability, macroenomic goals, revenue, etc]
• Elaborate on consequences [black market, riots and civil unrest, reputation, economic stability, population growth rate, etc]

Evalutation/Conclusion:

• [party] should make decision if it is concluded that benefits outweigh costs and all perspectives are considered.
• include another factor, short explanation

Question 5

Using a production possibility curve, explain the trade off that exists between allocating more resources towards Good A and allocating more resources towards Good B.

(Assume Good A and Good B are in limited capacity)

Answer 5

Trade-off: The more resources allocated towards Good A, the less resources allocated towards Good B.

To have more resources allocated towards Good A, resources allocated towards Good B must be given up → movement along the PPC curve from point A and point B → increasing opportunity cost

Draw PPC diagram

Question 6

Why is production possibility curve in a curve and not a straight line?

Answer 6

• Law of Diminishing Marginal Utility: The additonal benefit derived fron an increase in stock of a good/service diminishes with every increase in that stock
• Relate to how it results in increasing opportunity cost
• Thus causing a slope in PPC