Unit 1 Intro of econ

Question 1

What is economics?

Answer 1

The study of the use of scarce resources that have alternative uses. It is a social science which deals with human behavior.

Question 2

Branches of economics?

Answer 2

Micro = concerned with how individuals and business allocate resources and set prices for goods and services.
Macro = aggregate level, looks at economy as a whole. Used by govts and central govts to explore broader economic trends and track variables (i.e. inflation and unemployment).

Question 3

What is the basic economic problem?

Answer 3

Unlimited wants but limited resources.

Question 4

Basic economic questions?

Answer 4

1. what to produce? (ans: how to allocate scarce resources)
2. how to produce? (ans: how to allocate scarce resources)
3. for whom to produce? (ans: distribution of income among individuals in a population)

Question 5

7 key concepts of economics

Answer 5

1. Scarcity = a lack of something
2. Choice = ability to freely decide between alternatives
3. Equity = idea of being fair or just
4. Sustainability = to preserve for generations/ support a process over time
5. Economic well-being = level of prosperity and living standards
6. Change = shift in structure, policy, growth
7. Interdependence = relationship between two or more parties for the exchange of goods and fulfillment of needs.

Question 6

Rewards against FOP

Answer 6

Labor receives wages
Entrepreneurship receives profits
Capital receives interest
Land receives rent

Question 7

How are resources allocated?

Answer 7

Resource allocation = assignment of available resources to various uses.
Reallocation = shifting resources from one use to another to more efficient activities to maximize economic welfare.
Under/over allocation = goods/services aren’t produced at a level most desired by society.
Allocative efficiency = optimal allocation of resources in a way that maximizes overall welfare or satisfaction in an economy.

Question 8

Opportunity cost

Answer 8

The cost expressed in terms of the next best alternative sacrificed. Helps us view the true cost of decision making.

Question 9

PPC

Answer 9

Represents all possible combinations of max amount of 2 goods that can be produced assuming full use of resources and productive efficiency. If resources are not being used efficiently, there will be no curve.

Useful to demonstrate economic growth and opportunity cost

On curve = productive efficient
Lower = productive inefficiency
Outside = not attainable with current level of resources

Question 10

History of economics

Answer 10

Adam Smith was an economist and philosopher who believed in Laissez-faire. he wrote a book “An inquire into the nature and causes of wealth of nations” in 1776.
Marxism by Karl Marx critic of capitalism. Rich industrialists gaining wealth at the expense of workers. Believed workers could throw capitalism and replace with socialism.
Behavioral economics gives important to psychology and human behavior in decision-making. Why people might believe a certain way.