Micro- 1.1 The Economic Problem

Question 1

What’s economic goods?

Answer 1

Goods that command value

Question 2

What are free goods?

Answer 2

They’re not economic goods and don’t command value

Question 3

What’s a normative and positive statement?

Answer 3

Normative is opinion based
Positive is fact based and can be proven

Question 4

Who are the economic agents?

Answer 4

Government, firms and households

Question 5

What’s the role and objective of the economic agent: government?

Answer 5

They spend money and influence the economy through taxation and regulation of the markets.

Major objective is to have stability in the economy, to avoid excess unemployment and to achieve economic growth overtime.

Question 6

What’s the role and objective of the economic agent: firms?

Answer 6

To produce output of goods and services. And make choices on what to produce and prices.

Major objective is to make profit.

Question 7

What’s the role and objective of the economic agent: households?

Answer 7

To make choices about their expenditure.

Objective is to maximise their satisfaction or utility.

Question 9

Factors of productive and their rewards?

Answer 9

Land- rent
Labour- wages
Capital- interest
Enterprise- profit

Question 10

What’s scarcity?

Answer 10

Unlimited wants and needs but limited resources