Chapter 1

Question 1

economics

Answer 1

study of how individuals, businesses and institutions make CHOICES to optimise their level of SATISFACTION under conditions of SCARCITY

Question 2

productive resources

Answer 2

labour, managerial talent, tools and machinery, land and mineral deposits

Question 3

scarce economic resources

Answer 3

limited goods and services
quantity desired exceeds quantity available
restricts options and demands choices

Question 4

opportunity cost

Answer 4

the value of the next best alternative that is forfeited to undertake the chosen activity

Question 5

“free” products

Answer 5

as resources are used up, products cannot be free
labeled as free for marketing to influence CHOICES consumers make
product is free only in conjunction with a commitment from the consumer

Question 6

rational behaviour

Answer 6

Making decisions with some desired outcome in mind
reflects rational self-interest
looking for and pursuing opportunities to increase the level of SATISFACTION/utility when obtaining or consuming an article.

Question 7

utility

Answer 7

The pleasure, happiness or satisfaction obtained from consuming a good or service.

Question 8

rational consumer

Answer 8

Maximises his utility subject to budget constraints (may exceed using credit/overdraft)
Knows the wants they seek to satisfy, identifies the matching products, decides on respective quantities their budget permits
Think matter over carefully, weighing up the costs and benefits

Question 9

rational producer

Answer 9

Seeks to maximise profit, acting as cost-effectively/efficiently as possible.
Must think carefully about production process to reach max output such as production factors (& quantities thereof) , choose production techniques and productive inputs that will yield highest profit in the end.

Question 10

rational behaviour of gov. entities

Answer 10

what public services to provide and how to finance them

Question 11

optimal behaviour

Answer 11

• calculation
• negotiation
• expenditure
  actions that maximise an individual’s/entity’s satisfaction given constraints

Question 12

marginal analysis

Answer 12

comparison of marginal (extra or additional) benefits and marginal costs, usually for decision making
The decision to obtain the marginal benefit associated with some specific option always includes the marginal cost of forgoing something else. goal is to determine if the costs associated with the change in activity will result in a benefit that is sufficient enough to offset them.

Question 13

scientific method

Answer 13

procedure for the systematic pursuit of knowledge involving the observation of facts and the formulation and testing of hypothesis to obtain theories, principles and laws

Question 14

economic perspective

Answer 14

viewpoint that envisions individuals and institutions making rational decisions by comparing the marginal benefits and marginal costs associated w their actions

Question 15

economic principles

Answer 15

widely accepted generalisations (tendencies of typical/ave, don’t apply to everyone) about the economic behaviour of individuals or institutions

useful in analysing economic behaviour, understanding operation of economy, ascertaining cause and effect w/in economic system
gets rid of unnecessary complexity, explains and predicts outcomes

Question 16

other things equal assumption

Answer 16

ceteris paribus
the assumption that factors other than those being considered are held constant
not possible to work out impact of specific variable if other factors are changing as well, all variables besides those under immediate consideration constant

Question 17

macroeconomics

Answer 17

Part of economics concerned w/ economy as a whole; with such major aggregates as the household, business and gov sectors; and w measures of the total economy.

Like aggregate consumption, production (GDP), inflation, unemployment
Seeks to obtain an overview/general outline

Question 18

microeconomics

Answer 18

The part of economics concerned with decision making by individual units such as a household, a firm or an industry and with individual markets, specific goods and services, and product and resource prices.

Details of an economic unit/segment
Decision making by individual customers/workers/households/business firms.
Specifics/particulars

Question 19

positive economics

Answer 19

the analysis of facts or data to establish scientific generalisations about economic behaviour

Facts and cause-and-effect relationships
Description, theory development & theory testing
Avoids value judgements
Establishes scientific statements about economic behaviour
WHAT IS

Question 20

normative economics

Answer 20

The part of economics involving value judgements about what the economy SHOULD be like, focused on which economic goals and policies SHOULD be implemented, policy economics

(spoken abt on radio, news etc.)
Value judgements (what should the economy look like etc)
What policy actions should be undertaken
Opinions
Desirability of certain aspects of economy
WHAT OUGHT TO BE

Question 21

point out of ppf graph

Answer 21

unattainable

Question 22

scarcity

Answer 22

people have unlimited needs and wants, but the resources available to satisfy those needs and wants are limited, so society faces choices about how to allocate resources