The nature and purpose of economic activity.

Question 1

What is the central purpose of economic activity?

Answer 1

• The production of goods and services to satisfy needs and wants.

-The key economic decisions are: what to produce, how to produce and who is to benefit, from the goods and services produced.

Question 2

What is Economic welfare?

Answer 2

• The benefit gained by individuals, firms or society in the production of goods and services.

Question 3

What are economic agents?

Answer 3

• Are the individuals and firms that partake in economic activity, the demand for and supply of goods and services.

Question 4

What is a free market economy?

Answer 4

• It is one were firms decide what goods and services to produce with limited intervention from the government.

Question 5

What are economic incentives?

Answer 5

-They provide economic agents with the information required to tell them what goods and services to produce.

Question 6

What is a Positive statement?

Answer 6

-Objective statements that can be tested, amended or rejected by referring to the available evidence.

-Positive economics deals with objective explanation and the testing and rejection of theories.

Question 7

What is a Normative statement?

Answer 7

-Subjective statements - i.e: they carry value judgements.

-A value judgement is a subjective statement of opinion rather than a fact that can be tested by looking at the available evidence.