Questions and Answers
Economics deals with the management of scarce resources to satisfy human ______.
needs
The two divisions of economics are ______ and macroeconomics.
microeconomics
Scarcity refers to the limited availability of economic resources relative to society’s unlimited demand for ______.
goods
An ______ is a person who combines the economic resources for use in the production of goods and services.
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Capital refers to man-made goods used in the production of ______.
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The problem of scarcity gave birth to the study of ______
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The Greek word 'oikos' means ______
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Ceteris paribus means 'all other things held ______'
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Adam Smith is regarded as the 'Father of ______'
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Adam Smith's book, 'Wealth of the Nations' was published in ______
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John Stuart Mill and David Ricardo analyzed the political economy's ______ in its national economy
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David Ricardo's Theory of Comparative Advantage suggests that nations should export goods where they have the greatest ______
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Karl Marx emphasized that labor must be ______ necessary.
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Efficiency refers to productivity and proper allocation of economic ______.
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Equity in economics means justice and ______.
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Effectiveness means attainment of goals and ______.
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In economics, ______ refers to anything that has a functional value (usually in money).
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The process of distributing goods and services is known as ______.
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John Maynard Keynes argued that inadequate overall demand could lead to prolonged periods of high ______.
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The IS-LM model integrates the real IS (investment-saving) and monetary ______ (demand for, and supply for money).
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Positive economics uses objective or scientific explanation to analyze different ______ in the economy.
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Normative economics is concerned with human ______ and deals with ethics and personal value judgments.
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An economy must identify what are the commodities needed to be produced for the ______ of society.
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There is a need to identify the different methods and techniques in order to produce ______.
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Labor intensive production uses more of the human ______ or manual labor in producing goods.
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Normative economics answers the question ‘what ______ be’ regarding economic policies.
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Capital intensive production employs more technology and capital goods like machineries and equipment than ______ resources.
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Underproduction results in a failure to meet the needs and wants of ______.
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Overproduction results in excess goods and services going to ______.
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The study of ______ is important in understanding the behavior of economic subjects in society.
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An understanding of economics helps individuals to be wise ______ by informing them about economic policies.
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Economics seeks to analyze transactions made by society and its members, particularly regarding their behavior and decision ______.
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Money and finance are considered ______ in the study of economics.
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Economics explains the internal operation and trade policies of countries and measures their ______ advantage.
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Study Notes
Learning Objectives of Economics
- Defines economics as the management of scarce resources to meet unlimited human needs and wants.
- Identifies core problems in economics related to scarcity and resource allocation.
- Emphasizes a scientific approach to economics, utilizing models and theories for analysis.
Key Terms in Economics
- Needs vs Wants: Needs are essential for survival while wants are desires that enhance quality of life.
- Resources: Classified into four categories - land (natural resources), labor (human effort), capital (man-made production goods), and entrepreneurship (individuals who combine resources to create goods/services.
- Scarcity: Limited availability of resources relative to society's infinite demand for goods and services.
Division of Economics
- Microeconomics: Focuses on individual consumers and firms, analyzing price systems and specific market behaviors.
- Macroeconomics: Studies the economy as a whole, examining aggregates like total income, output, employment, spending, and price levels.
Historical Background of Economic Theory
- Adam Smith (1723-1790): Regarded as the "Father of Economics"; authored "Wealth of Nations", which promotes demand and supply dynamics through the concept of the "invisible hand".
- John Stuart Mill & David Ricardo: Contributed to political economy and comparative advantage theories, emphasizing state roles in economic contexts.
- Karl Marx (1818-1883): Argued that labor is central to production and that workers drive economic value.
- John Maynard Keynes (1883-1946): Proposed that insufficient demand can lead to unemployment, advocating for government intervention.
Important Concepts in Economic Analysis
- Ceteris Paribus: Assumes all other factors are held constant to analyze the relationship between specific economic variables.
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Positive vs Normative Economics:
- Positive economics examines economic conditions as they are, utilizing objective analysis.
- Normative economics assesses what economic conditions should be, incorporating value judgments and ethical considerations.
Fundamental Economic Questions
- Identifies four central questions: What to produce? How to produce? How much to produce? For whom to produce?
- Examines production methods:
- Labor-intensive (relying on human resources)
- Capital-intensive (using technology and machinery).
- Addresses potential issues of underproduction (failure to meet demand) and overproduction (excess goods wasting resources).
Relationship of Economics to Other Sciences
- Business Management: Connects through employment opportunities and economic balance.
- History: Provides insights into past economic theories and their relevance to current issues.
- Finance: Vital in studying monetary aspects of economics.
- Physics, Sociology, Psychology: All influence economic systems, consumer behavior, and microeconomic analysis.
Importance of Studying Economics
- Enhances understanding of societal behaviors and decision-making processes.
- Provides insights into global affairs, trade policies, and national competitiveness.
- Empowers individuals to make informed voting decisions regarding economic policies.
Three E's of Economics
- Efficiency: Focuses on optimal allocation of resources and enhancing productivity, measurable in both technological and economic terms.
- Equity: Addresses principles of fairness and justice in resource distribution, examining the impact of advancements on employment.
- Effectiveness: Pertains to achieving economic goals and objectives, serving as a tool across various fields.
Key Economic Terms
- Wealth: Anything with functional value, often measured in monetary terms.
- Consumption: The use of goods and services by households.
- Production: The process of creating goods and services.
- Exchange: The act of trading goods or services between parties.
- Distribution: How produced goods and services are allocated among consumers.
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Description
This quiz explores the foundational concepts of economics, including the definition of economics, the scientific approach, and key terms like needs, wants, and resources. It also delves into economic models and theories essential for understanding economic problems and decision-making. Test your knowledge and understanding of these vital economic principles.
