Micro 1: What is Economics?

Question 1

What is the fundamental economic problem?

Answer 1

Resources are scarce while the wants of individuals are unlimited.

Question 2

When is economic activity taking place?

Answer 2

Any time people provide a good or service using resources in order to satisfy the needs or wants of themselves or others. Eg. a gardener using land to grow fruit and vegetables to fulfill the need for food. The conversion of resources into goods and services.

Question 3

What is opportunity cost?

Answer 3

The value of the next best option which is forgone when an economic decision is made. It’s a benefit that could have been enjoyed within an economy which has to be given up or sacrificed in order to enjoy a different benefit.

Question 4

What is economics classified as?

Answer 4

A social science.

Question 5

What are positive statements?

Answer 5

These are statements that are used to describe reality and could in theory be shown to be true or false.

Question 6

What are normative statements?

Answer 6

These are usually seen to be matters of opinion which cannot be shown to be true or false.

Question 7

What is value judgement?

Answer 7

A judgement about what is good or bad, important or valuable, based upon subjective opinion, which informs economic and political decision making.

Question 8

What is a social science?

Answer 8

Scientific study (systematic study to gain knowledge and understanding of the world) of human interaction and social relationships.

Question 9

What is scarcity?

Answer 9

The state of being in short supply, especially relative to how much something is demanded.