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Questions and Answers
Economics deals with the management of scarce resources to satisfy human ______.
Economics deals with the management of scarce resources to satisfy human ______.
needs
The two divisions of economics are ______ and macroeconomics.
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 ______.
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.
An ______ is a person who combines the economic resources for use in the production of goods and services.
Capital refers to man-made goods used in the production of ______.
Capital refers to man-made goods used in the production of ______.
The problem of scarcity gave birth to the study of ______
The problem of scarcity gave birth to the study of ______
The Greek word 'oikos' means ______
The Greek word 'oikos' means ______
Ceteris paribus means 'all other things held ______'
Ceteris paribus means 'all other things held ______'
Adam Smith is regarded as the 'Father of ______'
Adam Smith is regarded as the 'Father of ______'
Adam Smith's book, 'Wealth of the Nations' was published in ______
Adam Smith's book, 'Wealth of the Nations' was published in ______
John Stuart Mill and David Ricardo analyzed the political economy's ______ in its national economy
John Stuart Mill and David Ricardo analyzed the political economy's ______ in its national economy
David Ricardo's Theory of Comparative Advantage suggests that nations should export goods where they have the greatest ______
David Ricardo's Theory of Comparative Advantage suggests that nations should export goods where they have the greatest ______
Karl Marx emphasized that labor must be ______ necessary.
Karl Marx emphasized that labor must be ______ necessary.
Efficiency refers to productivity and proper allocation of economic ______.
Efficiency refers to productivity and proper allocation of economic ______.
Equity in economics means justice and ______.
Equity in economics means justice and ______.
Effectiveness means attainment of goals and ______.
Effectiveness means attainment of goals and ______.
In economics, ______ refers to anything that has a functional value (usually in money).
In economics, ______ refers to anything that has a functional value (usually in money).
The process of distributing goods and services is known as ______.
The process of distributing goods and services is known as ______.
John Maynard Keynes argued that inadequate overall demand could lead to prolonged periods of high ______.
John Maynard Keynes argued that inadequate overall demand could lead to prolonged periods of high ______.
The IS-LM model integrates the real IS (investment-saving) and monetary ______ (demand for, and supply for money).
The IS-LM model integrates the real IS (investment-saving) and monetary ______ (demand for, and supply for money).
Positive economics uses objective or scientific explanation to analyze different ______ in the economy.
Positive economics uses objective or scientific explanation to analyze different ______ in the economy.
Normative economics is concerned with human ______ and deals with ethics and personal value judgments.
Normative economics is concerned with human ______ and deals with ethics and personal value judgments.
An economy must identify what are the commodities needed to be produced for the ______ of society.
An economy must identify what are the commodities needed to be produced for the ______ of society.
There is a need to identify the different methods and techniques in order to produce ______.
There is a need to identify the different methods and techniques in order to produce ______.
Labor intensive production uses more of the human ______ or manual labor in producing goods.
Labor intensive production uses more of the human ______ or manual labor in producing goods.
Normative economics answers the question ‘what ______ be’ regarding economic policies.
Normative economics answers the question ‘what ______ be’ regarding economic policies.
Capital intensive production employs more technology and capital goods like machineries and equipment than ______ resources.
Capital intensive production employs more technology and capital goods like machineries and equipment than ______ resources.
Underproduction results in a failure to meet the needs and wants of ______.
Underproduction results in a failure to meet the needs and wants of ______.
Overproduction results in excess goods and services going to ______.
Overproduction results in excess goods and services going to ______.
The study of ______ is important in understanding the behavior of economic subjects in society.
The study of ______ is important in understanding the behavior of economic subjects in society.
An understanding of economics helps individuals to be wise ______ by informing them about economic policies.
An understanding of economics helps individuals to be wise ______ by informing them about economic policies.
Economics seeks to analyze transactions made by society and its members, particularly regarding their behavior and decision ______.
Economics seeks to analyze transactions made by society and its members, particularly regarding their behavior and decision ______.
Money and finance are considered ______ in the study of economics.
Money and finance are considered ______ in the study of economics.
Economics explains the internal operation and trade policies of countries and measures their ______ advantage.
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.
- 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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