Microeconomics

• What is a positive economic statement?


  Statements that can be refuted or proven based on facts.
• What is a normative economic statement?


  Statements of opinion that cannot be proven or disproven.
• What phrases typically indicate a normative statement?


  Phrases like "should," "ought to," "best," or "worst."
• Why does economics contain many normative statements?

  Because it is a social science that cannot rely on experiments to prove or disprove statements.
• What is the basic economic problem?

  Limited resources but unlimited wants.
• What does opportunity cost refer to?

  The next best alternative forgone when making a choice.
• What is the definition of economics?

  A social science studying human relations and choices due to finite resources.
• What are the factors of production?

  Capital Enterprise Land Labour
• What is capital in the context of production?

  Man-made goods used to produce other goods/services, such as machinery.
• What is the role of enterprise in production?

  To take risks and organize the other factors of production.
• What is land in the context of production?

  Physical space and raw materials that come from the land.
• What distinguishes renewable resources from non-renewable resources?

  Renewable resources can be restored once exploited, while non-renewable resources cannot.
• Why do renewable resources have a lower opportunity cost?

  Because their future use is not as restricted.
• What does the Production Possibility Frontier (PPF) illustrate?

  The basic economic problem of choice and opportunity cost.
• What does a movement along the PPF curve represent?

  A change in the combination of goods or services produced.
• What does a shift of the PPF curve indicate?

  An increase in inputs or resources available for production.
• What does inefficiency in the context of PPF refer to?

  Waste or unemployment of resources.
• What is the difference between micro and macro PPFs?

  Micro PPFs can be curved or straight, while macro PPFs are typically curved.
• What are consumer goods?

  Goods used for consumption by consumers.
• What are capital goods?


  Goods used to produce other goods.
• What is economic growth?

  An increase in the maximum amount of goods and services produced.
• What is economic decline?

  A decrease in the maximum amount of goods and services produced.
• How can innovation in technology affect the PPF?

  It can increase the maximum amount of goods that can be produced.
• What does constant opportunity cost imply?

  The opportunity cost remains the same as production increases.
• What is specialization in economics?

  When workers, firms, regions, or countries focus production on a specific good.
• Who emphasized the importance of specialization in economic growth?

  Adam Smith in "The Wealth of Nations."
• What are the advantages of specialization?

  Increased productivity, efficiency, and output.
• What are the disadvantages of specialization?

  Risk of changes in trends and reduced income if output decreases.
• What are the key concepts related to the basic economic problem?

  • Limited resources
  • Unlimited wants
  • Scarcity
  • Choice
  • Opportunity cost
• What are the factors of production and their definitions?

  • Land: Physical space and raw materials
  • Labor: Human workers in production
  • Capital: Man-made goods for production
  • Enterprise: Risk-taker organizing production
• What are the types of resources in production?

  • Renewable resources: Can be restored (e.g., solar)
  • Non-renewable resources: Cannot be restored
• What are the implications of the Production Possibility Frontier (PPF)?

  • Illustrates the basic economic problem
  • Shows opportunity cost
  • Indicates efficiency and inefficiency in production
• What are the advantages and disadvantages of specialization?

  Advantages:

  • Increased productivity
  • Efficiency in production
  • Higher output

  
  

  Disadvantages:

  • Risk of changes in trends
  • Potential for reduced income if output decreases
• What is the nature of economics as described in the specification?

  Economics is a social science.
• What does thinking like an economist involve?

  It involves developing models in economics and making assumptions.
• What is the ceteris paribus assumption used for in economics?

  It is used in building models to hold other variables constant.
• Why can't economics conduct scientific experiments like other sciences?

  Because it deals with complex human behavior and societal factors.
• What is the distinction between positive and normative economic statements?

  Positive statements are factual, while normative statements involve value judgments.
• How do value judgments influence economic decision making?

  They affect the policies and choices made by individuals and governments.
• What is the economic problem related to scarcity?

  It is the situation where there are unlimited wants and finite resources.