Microeconomics Chapter 1 Quiz: Introduction

Scarcity and Resource Allocation

• The main concern of scarce resources in an economy is the problem of unlimited wants vs. limited resources.

Macroeconomics

• Macroeconomic variables include factors that affect the economy as a whole, such as GDP, inflation, and employment rates.

Subject Matter of Economics

• The subject matter of economics traditionally includes the study of production, distribution, and consumption of goods and services.

Centrally Planned Economy

• In a centrally planned economy, the central government makes all important decisions about the allocation of resources.
• The central government controls economic activities in a centrally planned economy.

Central Problems of an Economy

• The central problems of an economy are what to produce, how to produce, and for whom to produce.

Microeconomics

• The main focus of microeconomics is the study of individual economic units, such as households and firms.
• The scope of microeconomics includes the study of how these individual units make decisions about the allocation of resources.
• Microeconomic studies do not include the analysis of aggregate variables such as GDP or inflation.

Market Economy

• The main characteristic of a market economy is that it functions based on demand and supply conditions.

Types of Economics

• Normative economics deals with 'what ought to be', focusing on value judgments and policy recommendations.
• Positive economics follows a scientific explanation of the workings of the economy, focusing on facts and data analysis.

Economic Problems

• The central problem of an economy is related to the allocation of scarce resources to satisfy unlimited wants.
• The problem of limited resources and unlimited wants gives rise to the fundamental economic problem of scarcity.