Questions and Answers
What is the origin of the word 'economy'?
What is the main focus of microeconomics?
What is a characteristic of land as a factor of production?
What is the return of land?
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What is a characteristic of labour as a factor of production?
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What is the return of labour?
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What is capital in the context of economics?
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What is the main difference between microeconomics and macroeconomics?
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What is the main problem that leads to choice?
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What is the goal of a consumer when making a choice?
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What is an opportunity cost?
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Why do decisions require comparing costs and benefits of alternatives?
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What is the Production Possibilities Curve (PPC) used to explain?
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What is the definition of the Production Possibilities Curve (PPC)?
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What is one of the assumptions of the Production Possibilities Curve (PPC)?
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What is the question 'For Whom to Produce?' referring to in the basic economic problems?
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Which of the following is a characteristic of a free good?
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What is the return for an entrepreneur?
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Which type of good is owned by the government and funded by taxes?
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What is the primary reason for scarcity?
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Which of the following is NOT a characteristic of economic goods?
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What is the concept that describes the value of the best alternative forgone when making a choice?
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Which of the following is an example of a capital good?
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What is the term for the ability to increase and decrease the quantity of capital used in production?
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What does a point inside the PPC indicate?
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What does a point outside the PPC represent?
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What happens to the PPC when a country enjoys economic growth?
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What is the effect of natural disasters on the PPC?
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How does an improvement in technology affect the PPC?
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What does the PPC represent?
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What happens to the PPC when there are improvements in technology?
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What is the main difference between points inside and outside the PPC?
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What is meant by full employment in an economy?
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What does the Production Possibility Curve (PPC) illustrate?
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At Point A of the PPC, what is produced if all resources are allocated to sewing machines?
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What is true about the resources available in the context provided?
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What indicates the best possible combinations of resources on the PPC?
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If all resources are allocated to produce butter, which point is achieved?
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What happens to production if technology changes during the process?
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What do Points A to F on the PPC represent?
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Study Notes
Introduction to Microeconomics
- This chapter introduces economics, including several key concepts and terms such as scarcity, choice, and opportunity cost.
- Economics is the study of how people use their limited resources to try to fulfill unlimited wants and involves alternatives or choices.
- The field of economics is divided into microeconomics and macroeconomics.
Microeconomics vs Macroeconomics
- Microeconomics is the study of individual parts of the economy, such as public choices, business choices, and personal choices.
- Macroeconomics is the study of the economic system as a whole, including national income, trade cycle, unemployment rate, inflation, and general price level.
Economics Resources and Factors
- There are four main factors of production: land, labor, capital, and entrepreneur.
- Land is a naturally occurring resource with a fixed supply.
- Labor is skilled and unskilled and contributes physically and mentally to production.
- Capital includes assets such as money, equipment, machinery, and raw materials used in production.
- Entrepreneur is the person with the ability and skill to organize production and bear risks.
Types of Goods
- Economic goods have limited supply and involve price and opportunity cost.
- Free goods are unlimited in supply and can be obtained without cost, such as air and water.
- Public goods are owned by the government and paid for by taxpayers' money, such as public roads and powerhouses.
- Private goods are owned by individuals or companies and can be used by others if they pay or are allowed by the owner.
Basic Economic Concepts
- Scarcity refers to the limited products and services that can be produced to satisfy unlimited human needs and desires.
- Choice is the problem of scarcity that leads to decision-making between products and services.
- Opportunity cost is the second-best product or service that is given up in order to obtain the best product or service.
Basic Economic Problems
- What to produce refers to the type of goods and services to be produced.
- How to produce refers to the cheapest method of production.
- For whom to produce refers to the distribution of income.
Production Possibilities Curve (PPC)
- PPC is a graph that shows the various possible combinations of goods and services produced within a specified time period with all resources fully and efficiently employed.
- Assumptions of PPC include only two goods, full employment and full production capacity, fixed resources, and no change in technology.
- PPC explains basic economic concepts such as scarcity, choice, and opportunity cost.
Shift of PPC
- Factors that influence the shift of PPC include economic growth, improvements in technology, and natural disasters.
- Economic growth shifts PPC outward, while natural disasters shift PPC inward.
- Improvements in technology also shift PPC outward.
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Description
This chapter introduces the basics of economics, covering concepts such as scarcity, choice, and opportunity cost. It also discusses economic problems and issues.