Module 1: QUESTIONS- Intro to Microeconomics

Question 1

Who are exchanges made by? (6)

Answer 1

Individuals, Households, Businesses, Non-profit organizations, governments, and countries

Question 2

What is the FOCUS of Microeconomics?

Answer 2

The decision making process– of individual consumers, for non-profit firms, government entities and countries in the exchange of goods and services

Question 3

Who introduced Economics formally?

Answer 3

Adam Smith

Question 4

Who was Adam Smith?

Answer 4

A moral philosopher during the 1700s who wrote “The Wealth of Nations” and was published in 1776, he essentially introduced the concept of economics to what it is today.
He served several crowned princes of Europe’s capital, retired back in his birthplace of Kirkcaldy, Scotland.

Question 5

What was “The Wealth of Nations” about?

Answer 5

Published in 1776– Briefly: Smith explains how the wealth of a nation is measured by the amount of goods and services available to to consumers, and not by gold or other precious metals.

Question 6

What are the 4 founding principles of Economic thought?

Answer 6

Adam Smith produced the 4 Founding principles of Economic thought..

1. Self-interest
2. Maximization
3. Carcity
4. Opportunity Cost

Question 7

What’s a common misconception of “Self-interest”?

Answer 7

People believe that Self-interest is the same as being SELFISH and involves IGNORING the wants/needs of others..

.. but often people FAIL when focusing on THEMSELVES and DONT CONSIDER the well-being of others.

Question 8

What is the “invisible hand” famous metaphor?

Answer 8

In an economy based on voluntary exchange and trade, it is impossible to simultaneously advance ones own economic well-being while at the same time ignoring the wants and desires of others

Question 9

What’s non-commercial self interest?

Answer 9

It is where an individual may act with kindness or empathy in a situation, and expect the same kindness/empathy in return

Question 10

1. What is Maximization?

Answer 10

Maximization is the concept that individuals will attempt to constantly pursue their maximized desired preference set.

• Google: Maximization is A Process business firms undergo to ensure the best output and price levels are achieved in order to maximize its returns by looking and adjusting influential factors such as sale price, production cost and output levels.

Question 11

Maximization: Concept Questions

Answer 11

1. Why would someone choose to have less of a wanted good or service when they could have more?
2. If someone actively seeks LEISURE in their preference set, they will use their resources to their advantage in order to obtain LEISURE.
3. Why would a profit-making business choose a lower-level of profit over a higher-level of profit?
   – ( if the purpose of the business is to make money, then the behavior of the firm should be to act in a way that maximizes profits )

Question 12

2. Scarcity (concepts)