BSNS113: Economic Principles and Policy

Question 1

What is scarcity?

Answer 1

When there’s not enough to satisfy everyone at zero price

Question 2

What is the implication of scarcity?

Answer 2

The need to make tradeoffs

Question 3

What is economics?

Answer 3

The study of the systems societies use to allocate scarce resources to the production of goods and services and to distribute them to consumers

Question 4

What is microeconomics? (course mainly)

Answer 4

Study of how households and firms make decisions and how they interact in individual markets OR how good a job do markets do

Question 5

What is macroeconomics?

Answer 5

The study of economy wide phenomena, including inflation, unemployment and economic growth

Question 6

What are the 10 principles?

Answer 6

1. People make tradeoffs
2. The cost of something is what you give up to give it
3. Rational people think at the margin (and compare costs and benefits at the margin)
4. People respond to incentives
5. Trade can make everyone better off
6. Markets are usually a good way to organise economic activity
7. Govt can sometimes improve market outcomes
8. A countries standard of living depends on its ability to produce goods and services
9. Prices rise when the govt prints too much money
10. Society faces a short term trade off between inflation and unemployment

Question 7

What is a positive statement?

Answer 7

Claims that attempt to describe the world as it is

Question 8

What is a normative statement?

Answer 8

Claims that attempt to describe how the world should be