nature of economics

Question 1

is economics a social science

Answer 1

yes

Question 2

what does ceteris paribus mean?

Answer 2

all other variables remain constant

Question 3

what is a model?

Answer 3

model is a simplified version of reality

Question 4

why do models make a range of assumptions?

Answer 4

models make a range of assumptions, and this is necessary because there are constantly changing variables

Question 5

difference between natural and social science

Answer 5

natural sciences uses scientific method to prove a relationship between 2 variables
social science is used as there’s an inability to make scientific experiments as the circumstances or situations may vary at any point of time

Question 6

positive statement

Answer 6

based on evidence and tend to be statements of fact

Question 7

normative statement

Answer 7

value judgements, based on opinions and beliefs

Question 8

basic economic problem

Answer 8

basic economic problem is resources are scarce
infinite wants, finite resources

Question 9

4 factors of production

Answer 9

• land
• labour
• capital
• enterprise

Question 10

how to cope with problem of scarcity

Answer 10

due to problem of scaricity
- choices have to be made by producers, consumers and governments about the most efficient use of these resources
- and about how to allocate limited resources amongst competing wants and needs

Question 11

the scarcer a resource,

Answer 11

higher the price

Question 12

less scarce a resource

Answer 12

lower price

Question 13

renewable resources

Answer 13

can be used repeatedly and naturally replenished

Question 14

non-renewable resources

Answer 14

cannot be naturally replenished

Question 15

opportunity cost

Answer 15

opportunity cost is the loss of the next best alternative when making a decision

Question 16

PPF

Answer 16

PPF is an economic model that considers the maximum possible production (output) that a country can generate if it uses all its factors of production to produce only 2 goods or services

Question 17

outward shift in PPF

Answer 17

outward shift = economic growth, as there’s an increase in productive potential of an economy

Question 18

inward shift in PPF

Answer 18

inward shift = economic decline

Question 19

who came up with division of labour and specialisation

Answer 19

Adam Smith

Question 20

disadvantages of division of labour and specialisation

Answer 20

• task repetition leads to boredom and decrease in worker motivation
• decrease in motivation = less productivity and poor manufacturing quality
• may increase worker turnover rates

Question 21

advantages of division of labour

Answer 21

• increased productivity = firms to sell beyond local market into international markets
• higher labour productivity and higher output
• increased exports can result in economic growth for nation
• economic growth = higher income and better standard of living

Question 22

functions of money

Answer 22

• measure of value
• medium of exchange

Question 23

who supported mixed economies

Answer 23

adam smith = mixed economy

Question 24

who supported command economies

Answer 24

command economies = karl marx

Question 25

who supported free markets

Answer 25

free markets = Friedrich Hayek