Ch1

Question 1

What is economics?

Answer 1

Economics is the study of how individuals and groups (economic agents) choose to allocate scarce resources and how these choices impact society.

Question 2

Who are economic agents?

Answer 2

Economic agents include consumers, firms, governments, and others who make decisions.

Question 3

What is Scarcity?

Answer 3

A resource is considered scarce if its availability is limited relative to the desire for it when it is free.

Question 4

What causes scarcity

Answer 4

Scarcity requires individuals and societies to make choices among alternatives.

Question 5

What is positive economics?

Answer 5

Positive economics involves factual, objective statements that can be tested or confirmed through data.

Example: “Unemployment is 6%.”

Question 6

What is Normative Economics?

Answer 6

Normative economics involves subjective judgments or opinions about what ought to be.
i. Example: “The government should reduce unemployment.”

Question 7

What is microeconomics

Answer 7

Microeconomics focuses on individual decision-making by people, firms, and governments.

Question 8

What is macroeconomics?

Answer 8

Macroeconomics examines the economy as a whole, including inflation, unemployment, and economic growth.

Question 9

The Three Core Principles of Economics

Answer 9

Optimization, equilibrium, and empiricism

Question 10

How does the Free Rider Problem occur?

Answer 10

when individuals enjoy benefits without contributing to the cost, especially with public goods like clean air or national defense.