part 1/4

Question 1

The economic science is divided in two major branches, which and what are they like?

Answer 1

Economics, which study the global function in the economic system. Refers to all the consumers, and is the biggest actor which operates in all of the world.
Business economics, which study the function of individual companies, ex. Armani or Apple.

Question 2

Define. Microeconomics.

Answer 2

It focuses on how decisions are made by all individuals or companies and the consequences of those decisions.

Question 3

How does microeconomy differ from macroeconomy?

Answer 3

In difference, macroeconomy focuses on the behaviour of the company as a whole.

Question 4

What is an economy?

Answer 4

An economy is a system for coordinating the productive activities of the society.

Question 5

What could a typical microeconomy question be?

Answer 5

“Should I go to business school or take a job right now” This since it only refers to one individual, one decision and the possible consequences of that decision.

Question 6

What could a typical macroeconomy question be?

Answer 6

“How many people are unemployed in the economy this year”. This since it refers to the whole economy.

Question 7

What is the problem of scarcity facing all the consumers?

Answer 7

The problem is that our desires and wants are unlimited, although our resources are limited. As a result we need to choose between the various alternatives in order to be satisfied.

Question 8

What is the opportunity cost?

Answer 8

What the company has to sacrifice in order to produce in a different outcome.

Question 9

Practise to draw the production possibility curve. And practise from the powerpoint.

Answer 9

:)

Question 10

What is demand?

Answer 10

The amount of a product (good or service) consumers are willing and able to purchase at a given price. Effective demand is the real meaning of demand, which indicates that there is not just a desire to purchase but also a need of capacity to purchase.

Question 11

Practise to draw the demand curve.

Answer 11

:)

Question 12

What is ceteris paribus assumption?

Answer 12

It is that we assume that only the price of x changes. Other things are equal.

Question 13

What is the conditions of demand?

Answer 13

In reality there might be other variables who cause a change in quantity, a shift in the demand curve, either to right or left. The conditions of demand refers to those potential factors.

Question 14

Practise to draw the conditions of demand curve.

Answer 14

:)

Question 15

What is substitutes in consumption in a demand curve?

Answer 15

Used as a term describing when two or more products are seen as alternatives by consumers. That they are offering the same characteristics. For example Apple & Samsung, Louis Vuitton and Chanel.

Question 16

What is complements in consumption in a demand curve?

Answer 16

When two or more products are seen as “fitting together”, in a sense that purchasing one will result in purchasing the other. For example tennisrackets + tennisballs and pc+printer.

Question 17

What is the real income in a demand curve?

Answer 17

The real income refers to the actual purchasing power of the consumers. If a consumer’s income doubles, but the process of making beverage also doubles → the consumer won’t be able to purchase anything different from before. The real income is unchanged. However if the money income rises by a larger percentage than the average prices → the real income has risen, and vice versa.

Question 18

Variables that might cause an increase in demand?

Answer 18

A rise in the price of substitutes in consumption.
A fall in the price of complements in consumption.
A rise in the real income.
A change in tastes of households.
A rise in advertising expenditures.

Question 19

What will a change in the products own price Px (other things equal) result in?

Answer 19

Movements along the demand curve. Either an expansion or contraction.

Question 20

What will a change in a variable within the conditions of demand result in?

Answer 20

A shift in the demand curve, either an increase or decrease, to left or right.

Question 21

Write the demand curve function.

Answer 21

Qx= F(Px, Po, Y, T, Ax)

Question 22

Explain all the symbols:

Answer 22

Qx= quantity demanded for product x
Px= it’s own price
Po= price of other products
Y= real income
T= tastes of households
Ax= advertising expenditures

Question 23

What is the supply curve?

Answer 23

A visual representation of how much product sellers are willing and able to supply at different prices.

Question 24

What will happen with the supply if the price rises?

Answer 24

More product will be supplied.

Question 25

What might cause an increase of supply, from S1 to S2 (wheat)?

Answer 25

a fall in the price of substitutes in consumption.
a rise in the price of a complements in production.
a fall in the costs in production.
changes in tastes of producers in favor of x.
a rise in advertising expenditures.
a reduction in taxes.
favorable weather conditions.

Question 26

The supply function?

Answer 26

Qx= F(Px, Po, C, Tn, Tx, Tp,…)
Px= It’s own price
Po= Price of other products
C= Production costs
Tn= Technology
Tx= Tax rates
Tp= Tastes of production