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Questions and Answers
What is microeconomics?
What is microeconomics?
The study of small groups of individuals such as households, firms, investors, industries, etc.
Which of the following concepts does the Production Possibility Curve (PPC) illustrate?
Which of the following concepts does the Production Possibility Curve (PPC) illustrate?
- Opportunity Cost (correct)
- Scarcity (correct)
- Choice (correct)
- Inflation
In a free market economy, the government has a significant role in economic decision-making.
In a free market economy, the government has a significant role in economic decision-making.
False (B)
What defines a planned economy?
What defines a planned economy?
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What is a mixed economy?
What is a mixed economy?
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Study Notes
Introduction to Microeconomics
- Microeconomics studies the behavior and decision-making of small units such as households, firms, investors, and industries.
Scope of Microeconomics
- Examines various elements including free goods, economic goods, price versus value, and the classification of wants.
Free Goods and Economic Goods
- Free goods are available without cost and do not require resource allocation.
- Economic goods are scarce and require a system for allocation and pricing due to limited availability.
Price and Value
- Price is the monetary amount required for a good or service, while value refers to the importance or worth of that good or service to the consumer.
Classification of Wants
- Categorizes consumer desires into various tiers, often distinguished between basic needs and luxury wants.
Production Possibility Curve (PPC)
- Illustrates the trade-offs andOpportunity costs (OC) involved in the allocation of limited resources.
- Represents three core concepts: scarcity (limited resources), choice (selecting options), and opportunity cost (what is foregone to obtain something else).
Fixed Resources and Variable Resources
- Fixed resources remain constant regardless of production levels (e.g., land, buildings).
- Variable resources can change based on production needs (e.g., labor, raw materials).
Economic System
- A structured approach for managing production, resource allocation, and distribution of goods and services within a society.
Free Market Economy
- Buyers and sellers independently make decisions based on their preferences.
- Prices are determined by supply and demand dynamics, with no government intervention.
- Characterized as a capitalist economy focusing on individual choices.
Planned Economy
- Central authority or government makes all economic decisions, removing individual choices.
- No private property exists, leading to a socialist economic model where resources are communally owned.
Mixed Economy
- Combines elements from both capitalism and socialism.
- Contains both private ownership and public sector involvement, allowing for a balance between individual enterprise and government regulation.
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