Questions and Answers
What is scarcity?
The resources we use to produce goods and services are limited.
What is economics?
The study of choices when there is scarcity.
What are the factors of production?
The resources used to produce goods and services; also known as production inputs or resources.
What are natural resources?
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What is labor?
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What is physical capital?
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What is human capital?
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What is entrepreneurship?
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What is positive analysis?
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What is normative analysis?
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What is an economic model?
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What is a variable?
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What is microeconomics?
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What is marginal change?
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What is macroeconomics?
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What does ceteris paribus mean?
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The three basic economic questions a society must answer are _______ products do we produce? _______ do we produce the products? _______ consumes the products?
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What are the five factors of production?
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Positive statements answer questions like 'What will happen if...?'
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Normative statements answer questions like 'What will happen if...?'
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Most modern economics is based on positive analysis.
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Should your city build levees strong enough to protect the city from Category Five hurricanes? Is this normative or positive?
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How did Hurricane Katrina affect housing prices in New Orleans and Baton Rouge? Is this normative or positive?
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Who should pay for a new skate park? Is this normative or positive?
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Should a school district increase teachers' salaries by 20 percent? Is this normative or positive?
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Would an increase in teachers' salaries improve the average quality of teachers? Is this normative or positive?
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What is the economist's solution to the congestion problem?
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Some recent work by economists on the sources of growth suggests that institutions such as the ______ and ______ play key roles in economic growth.
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A road map incorporates two unrealistic assumptions ___________ and ________________.
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The four elements of the economic way of thinking are use _____ to simplify the analysis, explore the relationship between two variables by _________, think at the _________, and rational people respond to __________.
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Which of the following is the Latin expression meaning 'other things being held fixed'?
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The federal subsidy for hybrid cars was responsible for roughly ______ of the hybrid cars purchased in 2007.
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The economic approach to spam is to follow the lead of ______ and establish a ______ for email.
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Adam Smith suggested that people are motivated solely by self-interest.
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Study Notes
Scarcity and Economic Basics
- Scarcity refers to the limited nature of resources required to produce goods and services.
- Economics is the study of decision-making in conditions of scarcity, emphasizing choice and trade-offs.
Factors of Production
- Factors of production include natural resources, labor, physical capital, human capital, and entrepreneurship.
- Natural resources are materials derived from nature, used in production processes.
- Labor encompasses both physical and mental human efforts in creating goods and services.
- Physical capital consists of machinery, equipment, and infrastructure essential for production.
- Human capital represents the skills and knowledge gained through education and experience.
- Entrepreneurship is the coordination of various production factors to create and sell products.
Economic Analysis
- Positive analysis addresses "what is" or "what will be," focusing on factual statements.
- Normative analysis tackles "what ought to be," dealing with opinions and value judgments.
- Economic models simplify complex environments, often using graphs to illustrate relationships.
- Variables measure quantities that can change and are critical for analysis in economics.
Branches of Economics
- Microeconomics studies individual choices made by households and firms and their effect on markets.
- Macroeconomics analyzes the economy as a whole, focusing on large-scale issues like inflation, unemployment, and growth.
Fundamental Economic Questions
- Societies must determine what products to produce, how to produce them, and who will consume them.
- Five key factors of production are natural resources, labor, physical capital, human capital, and entrepreneurship.
Positive vs. Normative Statements
- True or False: Positive statements can predict outcomes, while normative statements express opinions.
- Most contemporary economic discussions are grounded in positive analysis.
- Examples of normative questions include societal decisions regarding funding initiatives or policy changes.
Economics and Institutions
- Institutional frameworks, such as the legal system and regulatory environment, are vital for economic growth.
Assumptions in Economic Models
- Economic models may rely on assumptions that simplify reality, such as a flat Earth or uniform road conditions.
The Economic Way of Thinking
- The economic approach involves simplifying analysis using assumptions, examining relationships through variable isolation, thinking at the margin, and recognizing that rational individuals respond to incentives.
Miscellaneous Facts
- Ceteris paribus is the Latin term denoting the holding of other variables constant during analysis.
- In 2007, federal subsidies accounted for approximately one-third of hybrid cars purchased.
- The response to spam issues is likened to mailing practices, suggesting a commercial price for email service.
- Contrary to popular belief, Adam Smith did not claim that self-interest solely motivates all human behavior.
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Description
Explore the fundamental concepts of economics in this flashcard quiz. From scarcity to factors of production, understand the key terms that define the field of economics. This resource is perfect for students looking to reinforce their knowledge of basic economic principles.
