Slide 1

Question 1

what is economics concerned with

Answer 1

economics is concerned with how choices are made when there is scarcity

unlimited wants, limited resources

Question 2

Describe the relationship between scarcity and choice

Answer 2

resources are limited, therefore there must be a choice of what we will have and what we will forgo

unlimited wants, limited resources

Question 3

define opportunity cost

Answer 3

the loss of the potential gain that would have come from the other alternatives after a choice has been made

Question 4

define benefit and cost

Answer 4

benefit: what you gain from something
cost: what you must give up to get something

Question 5

choices are made at the MARGIN.

What does this mean and how is it done?

Answer 5

the process of making decisions by considering the small incremental change in a variable

it is done by comparing marginal benefits and marginal costs

Question 6

define marginal benefit and marginal costs

Answer 6

benefit: additional benefits to consumers from consuming one additional unit of that good

cost: cost of producing one more unit

Question 7

true or false: economics relies on the scientific method

Answer 7

true

Question 8

what is the difference between micro and macroeconomics?

Answer 8

micro: individual/small scale

macro: large-scale phenomena

Question 9

What is the difference between a POSITIVE statement and a NORMATIVE statement?

Answer 9

positive: what is
normative: what ought to be

positive statements can be fact-checked. normative statement is an opinion and cannot be tested.