1.1 What is Economics

Question 1

What is economics?

Answer 1

Social science to examin how resources should be allocated to benefit the society.

Question 2

Basic economic Problem

Answer 2

Limited needs (resources) , unlimited wants

Question 3

4 Factors of Production (FOP)

Answer 3

Land, Labour, Capital, Enterprise

Question 4

Scarcity

Answer 4

Finite resources

Question 5

Needs

Answer 5

Goods and services necessary for survival

Question 6

Wants

Answer 6

Desires of goods and services

Question 7

Goods

Answer 7

Tangible products

Question 8

Services

Answer 8

intangible products

Question 9

Economic goods

Answer 9

Resources with limited supply with economics value (utility) to society.

Question 10

Renewable resources

Answer 10

Factors of production that can regenerate/ replenish (future proof)

Question 11

Free goods

Answer 11

No opportunity cost, abundance of supply

Question 12

Private sector

Answer 12

sector of economy where private firms produce goods and services

Question 13

Public sector

Answer 13

sector of economy where the government produces goods and services

Question 14

Free market economy

Answer 14

Purely relies on market forces of demand and supply to allocate scarce resources in the economy

Question 15

Mixed economy

Answer 15

Uses both public and private sector

Question 16

PPC/PPF

Answer 16

Model of the maximum combination of two products that a country can produce using all factors of production at any moment in time

Question 17

Marginal rate of transformation/ Rate of substitution

Answer 17

The gradient of the PPC showing the opportunity cost between the two products

Question 18

Pareto Efficiency

Answer 18

Occurs when it is not possible to make one person better off without making someone else worse off.

Question 19

Circular flow of income model

Answer 19

macroeconomic tool to explain how economic activity and national income are determined

Question 20

Economic Agents

Answer 20

economic decision makers comprising households, firms and the government

Question 21

Closed economy

Answer 21

Part of the circular flow of income model with firms. households and the governement, domestic sector. (where the economy has a limited amount of income in it.)

Question 22

Open economy

Answer 22

Part of the circular flow of income model with foreign economic decision makers (foreing sector)

Question 23

Injections (J)

Answer 23

Money entering the circular flow of income
J = G+I+X
government spending, exports, investment

Question 24

Leakages/ Withdrawals (W)

Answer 24

Money leaving the circular flow of income
W = S+T+M
savings, taxation, imports

Question 25

Economic Methodology

Answer 25

Study of the processes, practices and principles of economics. (Models, theories, assumptions, etc.)

Question 26

Positive Economics

Answer 26

Study of economics that is provable. Factual statements about the economy.

Question 27

Logic

Answer 27

Rationality and reasoning

Question 28

Hypothesis

Answer 28

Assumptions, notion, educated guess made before the research is done.

Question 29

Model

Answer 29

A hypothesis that had been repeatedly tested and proven/ rejected and can be used to explain the real world.

Question 30

Theory

Answer 30

A broad generaliztation used ot exaplin situations or scenarios already supported by economic evidence.

Question 31

Ceteris Paribus

Answer 31

Latin phrase "All other factors remain the same"

Question 32

Empirical Evidence

Answer 32

First-hand data and information acquired by observation/ experimentation.

Question 33

Refutation

Answer 33

Act of a statement/ theory being proven wrong by Empirical Evidence.

Question 34

Normative Economics

Answer 34

Considers people's varying opinions and beliefs.

Question 35

Value Judgements

Answer 35

Beliefs of individuals and scoieties about right and wrong.

Question 36

Equity

Answer 36

Fairness

Question 37

Economic thought

Answer 37

Historical account of different economics ideas.

Question 38

Laissez-faire

Answer 38

Free market without governement intervention.

Question 39

The "invisible hand"

Answer 39

Adam Smith's metaphor, individuals behaviour amd decision-making ultimately helps benefit society as a whole.

Question 40

Classical Economics

Answer 40

Self-regulating markets and allocative efficiency.

Question 41

Utility

Answer 41

Level of satisfaction by consumer from consumption

Question 42

Marginal Utility

Answer 42

Level of satisfaction gained by consumer per unit consumed

Question 43

Say's Law

Answer 43

Supply first, then Demand. Ability to purchase a product depends on the ability to produce or supply.

Question 44

Marxism

Answer 44

Macroeconomics policy that focuses on needs and values of the masses.

Question 45

Keynesian Economics

Answer 45

John Maynard Keynes, macroeconomic apporach to increase governement expenditure and decreases taxes to stimulte demand in the economy. (Fiscal policy)

Question 46

Monetarists

Answer 46

Monetary policy (using money supply and interest rates) to control economy.

Question 47

New Classical Counter Revolution (NCCR)

Answer 47

Supply-side policy, government interventions.

Question 48

Sustainability

Answer 48

Somethign that increases living standards without affecting the needs and wants of future generations.

Question 49

Circular economy

Answer 49

An economic system where raw materials, components and other resources are used sustainably to generate output.