Questions and Answers
Which of the following results from having scarce economic resources? (Select all that apply)
All nations have experienced widespread unemployment and unused production capacity from business downturns at one time or another.
True
A statement about economic behavior or the economy that enables prediction of the probable effects of certain actions is known as an: (Select all that apply)
What best clarifies the 'other-things-equal' assumption?
Signup and view all the answers
What defines positive economics?
Signup and view all the answers
Positive economics encourages value judgments.
Signup and view all the answers
What term refers to the economics that considers the desirability of certain aspects of the economy?
Signup and view all the answers
_____ economic analysis concerns what is, whereas _____ economic analysis embodies subjective feelings about what ought to be.
Signup and view all the answers
Normative, value-based policy questions or statements give rise to:
Signup and view all the answers
As a result of our ______ incomes and ______ wants, it is in our self-interest to economize.
Signup and view all the answers
Which of the following describes a budget line?
Signup and view all the answers
Which of the following combinations are unattainable given a consumer's budget line?
Signup and view all the answers
The straight-line budget constraint indicates _____ opportunity cost.
Signup and view all the answers
What is the relationship between trade-offs and opportunity cost?
Signup and view all the answers
Why must consumers forego choices based on a limited budget?
Signup and view all the answers
What will shift the budget line to the right?
Signup and view all the answers
As individuals' incomes rise, they will still be confronted with what?
Signup and view all the answers
What are factors of production?
Signup and view all the answers
How do capital goods differ from consumer goods?
Signup and view all the answers
What concept refers to the notion that all variables except those under immediate consideration are held constant?
Signup and view all the answers
What focuses on facts and cause-and-effect relationships?
Signup and view all the answers
Positive economics ______ value judgments, tries to establish _____ statements about economic behavior, and deals with _____ economic events.
Signup and view all the answers
What do trade-offs arising from limited resources give rise to?
Signup and view all the answers
Even at higher levels of ______, people will still face spending trade-offs, choices, and opportunity costs.
Signup and view all the answers
What are considered scarce economic ______ to production?
Signup and view all the answers
_____ goods satisfy wants directly, whereas _____ goods do so indirectly.
Signup and view all the answers
Study Notes
Scarcity and Economic Resources
- Scarcity leads to the production of limited goods and services.
- All nations have faced unemployment and unused production capacity during business downturns.
- Economic resources include labor, crude oil, land, entrepreneurial ability, and capital.
Economic Theories and Principles
- An economic theory or economic principle predicts effects of actions on economic behavior.
- Positive economics focuses on facts, cause-and-effect relationships, and scientific statements about economic behavior.
- Normative economics evaluates the desirability of economic aspects and supports specific policies.
Economic Analysis
- Positive economic analysis concerns "what is", while normative analysis focuses on "what ought to be."
- Normative statements can lead to controversy or disagreement among economists.
Budget Constraints and Choices
- Consumers face limited budgets and must make choices to maximize satisfaction.
- A budget line shows combinations of two products that can be purchased within a budget.
- Combinations beyond the budget line are considered unattainable.
Opportunity Cost and Trade-offs
- The straight-line budget constraint indicates constant opportunity costs.
- When consumption of one good is sacrificed for another, the trade-off incurs an opportunity cost.
Consumer Behavior
- Consumers aim to maximize utility within their limited budgets; they face choices, trade-offs, and opportunity costs regardless of income level.
- An increase in income shifts the budget line to the right.
Capital vs. Consumer Goods
- Consumer goods directly satisfy wants; capital goods satisfy wants indirectly by producing consumer goods.
- Understanding the nature of goods is crucial in economic production and consumer choice.
Assumptions in Economic Analysis
- The other-things-equal assumption (ceteris paribus) simplifies analysis by holding all variables except the ones under consideration constant.
- Positive economics avoids value judgments, establishes scientific statements, and deals with actual events.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
Test your understanding of key concepts in Economics Chapter 1, focusing on limits, alternatives, and choices. This quiz uses flashcards to reinforce fundamental economic principles and explore scenarios resulting from scarce resources. Challenge yourself and improve your grasp of economic decision-making!