Questions and Answers
What is economics primarily concerned with?
What is a fundamental economic problem?
What is a market economy?
What is macroeconomics concerned with?
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What is the main reason for economic problems?
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What is the focus of microeconomics?
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What is a characteristic of human wants?
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What is the relationship between microeconomics and macroeconomics?
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What is the central problem of an economy that deals with the distribution of National Income?
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What are the two key features of resources in an economy?
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What is required in a situation of scarcity?
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What is opportunity cost?
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What is the opportunity cost of watching a movie?
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What is true about an economy?
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Study Notes
Central Problems of an Economy
- The distribution of National Income is one of the central problems of an economy, which deals with the question "For whom to produce?"
- Other central problems include "What to produce?" and "How to produce?"
Features of Resources
- Resources in an economy have limited supply
- Resources have alternative uses
Scarcity and Choice
- Scarcity requires people to make choices
- Scarcity is the fundamental economic problem
Opportunity Cost
- Opportunity cost is the value of the next best alternative that is given up when a choice is made
- Example: The opportunity cost of watching a movie is the pleasure that could have been enjoyed watching TV instead
Economy
- An economy is a system of arrangement of all economic activities
- An economy is comprised of all the regions of a country
Types of Economies
- A market economy is an economy where all economic activities are organized through the market
- A centrally planned economy is an economy where all economic activities are organized through a central authority
Definition of Economics
- Economics is the study of the problem of choice under scarcity
Human Wants
- Human wants are unlimited and recurring
- Human wants are not limited
Microeconomics and Macroeconomics
- Microeconomics is concerned with the behavior of individual units such as consumers and firms
- Macroeconomics deals with economic aggregates, such as national income and inflation rate
Economic Problems
- The reasons for economic problems include scarcity of resources, alternative uses of resources, and unlimited human wants
- There is no way to solve economic problems once and for all, as they are inherent to the human condition
Interaction between Micro and Macro Economics
- Macroeconomics depends on microeconomics, as the total output of an economy is the sum of the total output of individual producers
Types of Economic Systems
- There are three types of economic systems: Market Economy, Planned Economy, and Mixed Economy
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Description
Assess your understanding of the fundamental concepts of microeconomics, including central problems and resource features. Test your knowledge of scarcity and economic decisions.