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Questions and Answers
Normative economics incorporates value judgments about what the economy should be like or what particular policy actions should be recommended to achieve a desirability of certain aspects of the economy. Examples: Positive statement: “The employment rate in several European nations is higher than that in the United States. Normative statements: 'European nations ought to undertake policies to reduce their unemployment rates.' Positive statement: 'Other things equal, if tuition is substantially increased, college enrollment will fall.' Normative statement: 'College tuition should be lowered so that more students can obtain an education.' SUMMARY Choices are forced on us by ______; economists study the choices that people make.
Normative economics incorporates value judgments about what the economy should be like or what particular policy actions should be recommended to achieve a desirability of certain aspects of the economy. Examples: Positive statement: “The employment rate in several European nations is higher than that in the United States. Normative statements: 'European nations ought to undertake policies to reduce their unemployment rates.' Positive statement: 'Other things equal, if tuition is substantially increased, college enrollment will fall.' Normative statement: 'College tuition should be lowered so that more students can obtain an education.' SUMMARY Choices are forced on us by ______; economists study the choices that people make.
scarcity
Scare goods are those for which the choice of one alternative requires giving up ______.
Scare goods are those for which the choice of one alternative requires giving up ______.
another
The opportunity cost of any choice is the value of the best alternative forgone in making that ______.
The opportunity cost of any choice is the value of the best alternative forgone in making that ______.
choice
Some key choices assessed by economists include what to produce, how to produce it, and for whom it should be ______.
Some key choices assessed by economists include what to produce, how to produce it, and for whom it should be ______.
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Economics is distinguished from other academic disciplines that also study choices by an emphasis on the central importance of opportunity costs in evaluating choices, the assumption of maximizing behavior that serves the interests of individual decision makers, and a focus on evaluating choices at the ______.
Economics is distinguished from other academic disciplines that also study choices by an emphasis on the central importance of opportunity costs in evaluating choices, the assumption of maximizing behavior that serves the interests of individual decision makers, and a focus on evaluating choices at the ______.
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Normative economics incorporates ______ judgments about what the economy should be like or what particular policy actions should be recommended to achieve a desirability of certain aspects of the economy.
Normative economics incorporates ______ judgments about what the economy should be like or what particular policy actions should be recommended to achieve a desirability of certain aspects of the economy.
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Positive statement: “The employment rate in several European nations is higher than that in the United States. Normative statements: 'European nations ought to undertake policies to reduce their unemployment rates.' Positive statement: 'Other things equal, if tuition is substantially increased, college enrollment will fall.' Normative statement: 'College tuition should be lowered so that more students can obtain an ______.'
Positive statement: “The employment rate in several European nations is higher than that in the United States. Normative statements: 'European nations ought to undertake policies to reduce their unemployment rates.' Positive statement: 'Other things equal, if tuition is substantially increased, college enrollment will fall.' Normative statement: 'College tuition should be lowered so that more students can obtain an ______.'
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SUMMARY Choices are forced on us by scarcity; economists study the choices that ______ make.
SUMMARY Choices are forced on us by scarcity; economists study the choices that ______ make.
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Scare goods are those for which the choice of one alternative requires giving up ______.
Scare goods are those for which the choice of one alternative requires giving up ______.
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Some key choices assessed by economists include what to produce, how to produce it, and for whom it should be ______.
Some key choices assessed by economists include what to produce, how to produce it, and for whom it should be ______.
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Study Notes
Definition of Economics
- Economics originates from the Greek word "Oikonomia," meaning management of household or household rules.
- Defined as a social science studying choices regarding scarce productive resources and the production and distribution of goods.
Scarcity, Choice, and Opportunity Cost
- Scarcity entails making choices between alternatives due to limited resources.
- Opportunity cost represents the value of the best alternative forgone when making a choice, highlighting trade-offs involved in decision-making.
Fundamental Economic Questions
- Every economy addresses:
- What should be produced with scarce resources?
- How should goods and services be produced?
- For whom should goods and services be produced?
Economic Way of Thinking
- Economists focus on choices demanded by scarcity, making their approach distinct from other social sciences.
- Economic theories predict probable effects of certain actions on economic behavior.
- Employs ceteris paribus (other-things-equal) assumption to analyze variables while holding others constant.
- Theories are simplifications that exclude irrelevant information, aiding in clearer understanding.
Microeconomics vs. Macroeconomics
- Microeconomics analyzes individual economic units and smaller segments of the economy.
- Macroeconomics studies the economy as a whole or its major aggregates, such as government, households, and businesses.
Positive vs. Normative Economics
- Positive economics examines factual relationships and causality within the economy, including description, theory development, and testing.
- Normative economics deals with value judgments and prescriptive statements about economic policies.
Examples of Scarcity, Choice, and Opportunity Cost
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DENR Preservation Case:
- Scarcity arises from the decision to preserve land for endangered species versus development.
- Opportunity cost is the potential economic benefits from housing development lost by preserving the area.
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Hacienda Luisita Decision:
- Choice involves selecting between two crops, corn or Ashitaba, within the same resource constraints.
- Opportunity cost is the expected benefits from the foregone crop when choosing one over the other.
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Young Man's Decision:
- Scarcity is evident when leaving a job to pursue college education, implying a trade-off.
- Opportunity cost includes lost wages and work experience from leaving the job for education.
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Description
Test your understanding of scarcity, choice, and opportunity cost by identifying these elements in real-life scenarios. In this quiz, analyze a situation involving the Department of Natural Resources and Environment (DENR) considering preserving a 5000-hectare area outside Marawi City to protect an endangered species.
