week 1

Question 1

2 types of statements

Answer 1

positive, normative

Question 2

What is a positive statement?

Answer 2

Statement that can be tested

Question 3

What is a normative statement?

Answer 3

Opinion-based statement that can’t be tested

Question 4

What science is economics and why

Answer 4

Social science. Because economic agents cannot predict how all humans behave due to humans’ irrational behaviour

Question 5

Examples of economic agents

Answer 5

Govt, firms and households

Question 6

What is opportunity cost

Answer 6

Benefits lossed when a decision is made

Question 7

4 factors of production

Answer 7

Capital - man-made goods used to produce other goods and services
Enterprise - the person who organizes the other factors of production and takes risk
Labour- all human effort
Land - all natural resources

Question 8

What do the FoPs produce

Answer 8

Goods and services

Question 9

2 Types of mobility

Answer 9

Geographical - the ability to move from one area to another
Occupational - the ability to move from one use to another

Question 10

What do PPFs show

Answer 10

show the ability to produce varying amounts of output of two goods/services, with the given FoP. AND the OC

Question 11

Capital goods importance in PPFs

Answer 11

Capital goods are required to increase the factors of production.
If a company produces more capital goods it can produce more consumer goods as well in the long term

Question 12

Curved PPF and diagram

Answer 12

Curved line PPFs mean the factors of production are not perfectly transferable, some if the factors of production are better at producing one good than the other. This means the opportunity cost changes along the PPF

DRAW DIAGRAM PG9 book

Question 13

3 types of PPF efficiency

Answer 13

Productive efficiency – producing at the lowest possible cost
Allocative efficiency - allocating resources in the best possible way to maximise welfare. We don’t know where this is because PPFs show us what we COULD produce and not what we SHOULD produce
as this is decided by supply and demand or governments

Question 14

Straight line PPF and diagram

Answer 14

Straight-line PPFs mean that the factors of production are perfectly transferable. Factors of production are equally useful at producing both goods. This means that the opportunity cost is constant along the PPF.

DRAW diagram PG 11

Question 15

Diminishing marginal utility meaning

Answer 15

• Diminishing – gets smaller
• Marginal – one more
• Utility – satisfaction
  As you consume more of a g/s , , each subsequent unit consumed gives less satisfaction than the previous unit

Question 16

Diminishing marginal utility diagram

Answer 16

Straight line PPF diagram