Microeconomics Introduction Chapter

Questions and Answers

What is economics primarily concerned with?

The problem of choice under scarcity (correct)

The study of stocks and bond markets

The study of business firms

The study of management decisions

What is a fundamental economic problem?

Neither a) nor b)

Unlimited human wants

Scarcity of resources (correct)

Both a) and b)

What is a market economy?

An economy in which all economic activities are organised through the market (correct)

A centrally planned economy

A mixed economy

An economy in which all economic activities are organised through the government

What is macroeconomics concerned with?

Economic aggregates Signup and view all the answers

What is the main reason for economic problems?

All of the above Signup and view all the answers

What is the focus of microeconomics?

How producers and consumers interact in individual markets Signup and view all the answers

What is a characteristic of human wants?

Recurring Signup and view all the answers

What is the relationship between microeconomics and macroeconomics?

Macroeconomics depends on microeconomics Signup and view all the answers

What is the central problem of an economy that deals with the distribution of National Income?

For whom to produce Signup and view all the answers

What are the two key features of resources in an economy?

Limited supply and alternative uses Signup and view all the answers

What is required in a situation of scarcity?

Making choices Signup and view all the answers

What is opportunity cost?

The value of the next best alternative given up Signup and view all the answers

What is the opportunity cost of watching a movie?

The pleasure that could have been enjoyed watching TV instead Signup and view all the answers

What is true about an economy?

Resources are limited and have alternative uses Signup and view all the answers

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