p.64
Circular Flow of Income: Models and Sectors
What do households need to pay firms for?
The flow of goods and services.
p.81
Circular Flow of Income: Models and Sectors
What does the four-sector model of the circular flow of income include?
Household, firms, government, and foreign trade sectors.
p.62
Circular Flow of Income: Models and Sectors
What is the main concept discussed in the lecture?
The circular flow of economy.
p.22
Business Economics: Application in Decision-Making
What is the purpose of analysis in Business Economics?
To identify problems, organize information, and evaluate alternatives.
p.91
Leakages and Injections in the Circular Flow of Income
What are leakages in the Circular Flow of Income?
Leakages refer to the income that is withdrawn from the economy, such as savings, taxes, and imports.
p.91
Leakages and Injections in the Circular Flow of Income
What are injections in the Circular Flow of Income?
Injections are additions to the economy, including investments, government spending, and exports.
p.76
Circular Flow of Income: Models and Sectors
What assumption is made about the economy in the three-sector model?
The economy is closed, with no transactions with the rest of the world.
p.63
Circular Flow of Income: Models and Sectors
What is the circular flow of income?
It describes the movement of goods or services and income among different sectors of the economy.
p.6
Business Economics: Application in Decision-Making
What is the purpose of Business Economics for management?
To facilitate decision-making and forward planning.
p.18
Business Economics: Application in Decision-Making
How can Business Economics inform marketing strategies?
By analyzing consumer behavior to tailor marketing strategies.
p.32
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What characterizes the long run in economic terms?
All inputs can be changed.
p.64
Circular Flow of Income: Models and Sectors
What does the real flow refer to?
The flow of factor services and the flow of goods and services.
p.24
Business Economics: Application in Decision-Making
What is the primary focus of Business Economics?
It focuses on the firm, not the economy.
p.25
Business Economics: Application in Decision-Making
What does Business Economics evaluate?
The choice of alternatives.
p.5
Business Economics: Application in Decision-Making
What are the outcomes of applying Business Economics principles?
Strategic decisions that drive profitability and growth.
p.68
Circular Flow of Income: Models and Sectors
What does the Firms Sector include?
All business entities, corporations, and partnerships.
p.78
Leakages and Injections in the Circular Flow of Income
How do taxes influence the circular flow model?
They represent a leakage from the flow of income.
p.75
Circular Flow of Income: Models and Sectors
What does the two-sector model in the circular flow represent?
The interaction between households and firms.
p.18
Business Economics: Application in Decision-Making
What is one application of Business Economics in decision-making?
Cost-benefit analysis for investment decisions.
p.18
Business Economics: Application in Decision-Making
How does Business Economics assist in pricing strategies?
It helps in developing pricing strategies in competitive markets.
p.6
Business Economics: Application in Decision-Making
How does Business Economics combine different fields?
It combines economic theory with business practices.
p.75
Leakages and Injections in the Circular Flow of Income
How does investment affect the circular flow in the two-sector model?
It injects money back into the economy, stimulating production.
p.75
Circular Flow of Income: Models and Sectors
What is the significance of the circular flow model?
It illustrates how money moves through an economy and the relationship between different sectors.
p.18
Business Economics: Application in Decision-Making
What is a strategic application of Business Economics?
Strategic planning and market entry decisions.
p.86
Leakages and Injections in the Circular Flow of Income
What is a leakage in the Circular Flow of Income?
An outflow of income from the circular flow model.
p.39
Business Economics: Application in Decision-Making
What is the primary focus of Business Economics?
Application of economic theory and principles to business decision-making.
p.44
Strands of Economics: Microeconomics and Macroeconomics
What was the focus of economic science before 1936?
It was largely microeconomic.
p.23
Business Economics: Application in Decision-Making
What is the definition of Business Economics according to Spencer and Siegelman?
Business Economics is the integration of economic theory and practice for the purpose of facilitating decision-making and forward planning by management.
p.78
Circular Flow of Income: Models and Sectors
What are the three key elements added by the government sector to the circular flow model?
Taxes, government purchases, and government borrowings.
p.81
Circular Flow of Income: Models and Sectors
What is the purpose of the circular flow of income model?
To illustrate the interactions between different sectors in the economy.
p.9
Notable Economists and Their Contributions
What is John Nash known for in the field of economics?
His contributions to game theory, widely used in business strategy.
p.13
Strands of Economics: Microeconomics and Macroeconomics
What does microeconomics study?
Individual units such as consumers and firms.
p.16
Definition and Importance of Economics
What is the primary focus of Economics?
The study of how societies allocate scarce resources.
p.13
Strands of Economics: Microeconomics and Macroeconomics
What are the key market mechanisms studied in microeconomics?
Supply and demand, pricing.
p.84
Circular Flow of Income: Models and Sectors
What are the four sectors in the circular flow model?
Households, businesses, government, and foreign sector.
p.17
Business Economics: Application in Decision-Making
What role does Business Economics play in decision-making?
It guides firms in optimizing production, setting prices, entering new markets, and managing resources efficiently.
p.3
Definition and Importance of Economics
What is the definition of Economics?
Economics is the social science that studies how individuals, firms, governments, and societies make choices on allocating limited resources to satisfy their unlimited wants.
p.84
Circular Flow of Income: Models and Sectors
How do households interact in the circular flow model?
By providing factors of production to businesses and receiving income in return.
p.63
Circular Flow of Income: Models and Sectors
What does the circular flow of income illustrate?
The interdependence of sectors and markets to facilitate both real and monetary flow.
p.17
Business Economics: Application in Decision-Making
How does Business Economics help businesses in the market?
It helps businesses understand and navigate complex market environments.
p.48
Positive vs. Normative Economics
What is a key challenge in public policy discussions involving normative economics?
Higher levels of disagreement due to the inability to prove correctness.
p.85
Leakages and Injections in the Circular Flow of Income
What are injections in the circular flow of income?
Factors that increase the volume of income in the circular flow.
p.10
Notable Economists and Their Contributions
What contributions did Richard Thaler make to earn the Nobel Prize in Economics in 2017?
His contributions to behavioral economics.
p.33
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What does the Discounting Principle state?
A rupee now is worth more than a rupee in the future.
p.63
Circular Flow of Income: Models and Sectors
Why is the circular flow model important?
It is essential for understanding concepts like national income, aggregate demand, and aggregate supply.
p.33
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
Why is the present value of future returns important?
It is essential for investment decisions.
p.13
Strands of Economics: Microeconomics and Macroeconomics
Which economic indicators are important in macroeconomics?
GDP, inflation, unemployment.
p.59
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
How is Accounting Profit calculated?
Total Revenue - Explicit Costs.
p.84
Circular Flow of Income: Models and Sectors
What role do businesses play in the circular flow model?
They produce goods and services and pay wages to households.
p.63
Circular Flow of Income: Models and Sectors
What forms the basis for all macroeconomic models of the economy?
The circular flow of income.
p.64
Circular Flow of Income: Models and Sectors
What is the flow of goods and services?
From firms to households.
p.84
Circular Flow of Income: Models and Sectors
How does the government participate in the circular flow model?
By collecting taxes and providing public goods and services.
p.65
Circular Flow of Income: Models and Sectors
In what manner do real flow and monetary flow move?
They move in a circular manner in opposite directions.
p.52
Current Affairs Impacting Business Economics
Can scarcity be intentionally created?
Yes, as seen in money supply management.
p.77
Circular Flow of Income: Models and Sectors
What are transfer payments?
Payments made by the government to households.
p.54
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What causes supply scarcity?
Happens when the supply of a resource is low or depleted, often due to weather, natural disasters, or resource depletion.
p.56
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
How can international diplomacy create scarcity?
Through embargoes, tariffs, and geopolitical issues.
p.51
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What is scarcity in economics?
A situation where demand for a good or service exceeds its availability.
p.2
Definition and Importance of Economics
What does Kaibalyapati Mishra suggest about the importance of economics?
Economics has an interest in understanding everything under the sun.
p.91
Leakages and Injections in the Circular Flow of Income
How do leakages affect the Circular Flow of Income?
Leakages reduce the total income available in the economy, potentially leading to a decrease in overall economic activity.
p.25
Business Economics: Application in Decision-Making
How does Business Economics assist in problem analysis?
By providing concepts for analyzing problems.
p.5
Business Economics: Application in Decision-Making
What is the primary focus of Business Economics?
To apply economic theories and principles to business decision-making.
p.8
Theories in Business Economics: Game Theory and Market Structure
What does the Theory of the Firm examine?
How firms make decisions regarding production, costs, and pricing.
p.4
Strands of Economics: Microeconomics and Macroeconomics
What does Behavioral Economics study?
How psychological factors influence economic decision-making.
p.59
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
How is Economic Profit calculated?
Total Revenue - Opportunity Cost.
p.16
Business Economics: Application in Decision-Making
Which factors are analyzed in Business Economics?
Demand, production, costs, and pricing strategies.
p.8
Theories in Business Economics: Game Theory and Market Structure
What does Game Theory analyze?
Strategic interactions among firms in competitive environments.
p.65
Circular Flow of Income: Models and Sectors
How does the income of one sector relate to another sector in monetary flow?
The income of one sector becomes the expenditure of another sector.
p.52
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What resources are limited due to scarcity?
Workers, investment, and raw materials.
p.86
Leakages and Injections in the Circular Flow of Income
What do leakages represent in the circular flow model?
The part of income that households withdraw and do not use to purchase goods and services.
p.7
Current Affairs Impacting Business Economics
What are trade wars and how do they affect global markets?
Trade wars involve tariffs and restrictions that can lead to market instability and affect business decisions.
p.59
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
Why are economic profits typically lower than accounting profits?
Because opportunity costs include both explicit and implicit costs.
p.3
Definition and Importance of Economics
Who are the economic agents studied in Economics?
Individuals, firms, governments, and societies.
p.54
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What is demand scarcity?
Occurs when there is a high demand for a resource or product, often due to increasing populations or changes in preferences.
p.14
Business Economics: Application in Decision-Making
What is the purpose of Cost-Benefit Analysis in business?
Maximizing profitability.
p.69
Circular Flow of Income: Models and Sectors
What levels of government are included in the government sector?
Center, state, and local governments.
p.66
Circular Flow of Income: Models and Sectors
What is the circular flow of income?
A continuous flow of production, income, and expenditure.
p.6
Business Economics: Application in Decision-Making
What is Business Economics?
The study of how businesses manage their resources, make decisions, and achieve their objectives in a competitive environment.
p.32
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What is the main difference between the short run and long run in economics?
In the short run, some inputs are fixed; in the long run, all inputs can be changed.
p.75
Leakages and Injections in the Circular Flow of Income
What role does saving play in the circular flow model?
It represents the portion of income not spent on consumption.
p.41
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What is the primary focus of the concept of constraints in economics?
Constraints limit the choices available to individuals and organizations.
p.16
Business Economics: Application in Decision-Making
What does Business Economics specifically analyze?
The application of economic theories to business decisions.
p.65
Circular Flow of Income: Models and Sectors
What is monetary flow?
The movement of money/cash payment from one sector to another corresponding to the real flow.
p.91
Leakages and Injections in the Circular Flow of Income
What is the relationship between leakages and injections?
For the economy to remain in equilibrium, total leakages must equal total injections.
p.85
Leakages and Injections in the Circular Flow of Income
What are leakages in the circular flow of income?
Factors that reduce the volume of income in the circular flow.
p.64
Circular Flow of Income: Models and Sectors
What is the flow of factor services?
From households to firms.
p.15
Business Economics: Application in Decision-Making
What does cost analysis in manufacturing involve?
Evaluating production costs to improve efficiency and profitability.
p.8
Theories in Business Economics: Game Theory and Market Structure
What is the focus of Market Structure Analysis?
The impact of different market structures on business behavior.
p.56
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
How can world health issues lead to scarcity?
Epidemics and pandemics can cause scarcities in food supplies, medical personnel, and animal products.
p.67
Circular Flow of Income: Models and Sectors
What are the factors of production provided by households?
Land, Labour, Capital, Enterprise.
p.85
Circular Flow of Income: Models and Sectors
How does the flow of income in the circular flow model behave?
It does not always remain constant.
p.39
Strands of Economics: Microeconomics and Macroeconomics
What is an example of a concept studied in Microeconomics?
Supply and demand for a specific product.
p.48
Positive vs. Normative Economics
Why should normative economics not be the sole basis for decision-making?
Because positive economics provides the objective, fact-based angle.
p.84
Circular Flow of Income: Models and Sectors
What is the significance of the foreign sector in the circular flow model?
It represents trade with other countries, affecting imports and exports.
p.43
Strands of Economics: Microeconomics and Macroeconomics
What does microeconomics focus on?
Individual decisions and specific markets.
p.55
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What causes land scarcity?
Shortage of land for agriculture, housing, or infrastructure, exacerbated by desertification and deforestation.
p.52
Current Affairs Impacting Business Economics
How does intentional scarcity affect the economy?
It impacts inflation and economic growth.
p.22
Business Economics: Application in Decision-Making
What does Business Economics link?
It links abstract theory and business practice.
p.68
Circular Flow of Income: Models and Sectors
What is the primary function of the Firms Sector?
To produce goods and services for sale in the market.
p.78
Leakages and Injections in the Circular Flow of Income
What role do government purchases play in the circular flow model?
They act as an injection into the economy.
p.76
Circular Flow of Income: Models and Sectors
Why is the three-sector model considered more realistic?
Because it includes economic activities of the government.
p.10
Notable Economists and Their Contributions
What was Jean Tirole awarded the Nobel Prize in Economics for in 2014?
His analysis of market power and regulation.
p.9
Notable Economists and Their Contributions
What area of economics is Oliver Williamson known for?
Transaction cost economics, which impacts business operations.
p.25
Business Economics: Application in Decision-Making
What is one of the key roles of Business Economics?
Helps in making decisions.
p.52
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
How does scarcity affect consumer decisions?
It influences the choices consumers make regarding goods and services.
p.15
Business Economics: Application in Decision-Making
What is an example of demand forecasting in retail?
Using historical sales data to predict future product demand.
p.7
Current Affairs Impacting Business Economics
How does inflation influence business pricing strategies?
Businesses adjust prices to maintain profit margins in response to rising costs.
p.3
Definition and Importance of Economics
What does Economics focus on?
The behavior and interactions of economic agents and how economies work.
p.49
Positive vs. Normative Economics
What is an example of normative economics?
Advocating for a higher minimum wage for workers.
p.5
Business Economics: Application in Decision-Making
Where does Business Economics lie?
At the intersection of economics and business.
p.24
Positive vs. Normative Economics
What is the character of Business Economics?
It is normative rather than positive.
p.40
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What is an example of an incentive affecting employee output?
A per hour salary for workers can increase output.
p.72
Circular Flow of Income: Models and Sectors
What does the two-sector model in the circular flow represent?
The interaction between households and firms.
p.46
Positive vs. Normative Economics
What is a key advantage of positive economics?
It is based on facts instead of opinions and value judgments.
p.31
Business Economics: Application in Decision-Making
How is accounting profit calculated?
Total revenue minus the money cost of producing goods or services.
p.38
Business Economics: Application in Decision-Making
What is the fourth step in the business decision-making process?
Select the best alternative.
p.4
Strands of Economics: Microeconomics and Macroeconomics
What is Microeconomics?
The study of individual markets and the behavior of firms and consumers.
p.2
Definition and Importance of Economics
According to Kaibalyapati Mishra, is it necessary for everyone to learn economics?
No, it might not be everyone’s business to learn economics.
p.1
Business Economics: Application in Decision-Making
What is the focus of Business Economics?
The application of economic theory and methodologies to business decision-making.
p.84
Circular Flow of Income: Models and Sectors
What does the circular flow model illustrate?
The flow of goods, services, and money in an economy.
p.91
Leakages and Injections in the Circular Flow of Income
How do injections influence the Circular Flow of Income?
Injections increase the total income in the economy, stimulating economic growth and activity.
p.7
Current Affairs Impacting Business Economics
What impact did COVID-19 have on global supply chains?
It disrupted supply chains worldwide, causing delays and shortages.
p.5
Business Economics: Application in Decision-Making
How does Business Economics help firms?
By helping them understand market dynamics and optimize resource allocation.
p.67
Circular Flow of Income: Models and Sectors
What does the Household Sector include?
All the individuals in the economy.
p.41
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What can be considered as constraints in economic decision-making?
Resources such as time, money, and materials.
p.24
Strands of Economics: Microeconomics and Macroeconomics
How does Business Economics relate to macro-economics?
It takes help from macro-economics to understand the environment.
p.16
Business Economics: Application in Decision-Making
How does Business Economics help businesses?
By aiding in achieving their goals through economic analysis.
p.82
Circular Flow of Income: Models and Sectors
What is income outflow in the context of foreign trade?
When firms and governments make payments for imports.
p.86
Leakages and Injections in the Circular Flow of Income
What is saving in the context of leakages?
Income not used to purchase goods/services or pay taxes; kept with financial institutions.
p.20
Business Economics: Application in Decision-Making
What is the main focus of the group-based project?
Application of business economics theories to real-world scenarios.
p.19
Business Economics: Application in Decision-Making
What is the purpose of the MCQ quizzes at the end of each section?
To reinforce key concepts.
p.73
Circular Flow of Income: Models and Sectors
What is assumed in the basic Circular Flow of Income model regarding household income?
The household sector spends its entire income with no saving.
p.88
Leakages and Injections in the Circular Flow of Income
How do injections affect the volume of income in the circular flow?
Injections increase the volume of income.
p.46
Positive vs. Normative Economics
How does positive economics help policymakers?
It enables them to make wiser decisions with factual data.
p.28
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What does incremental cost refer to?
Change in total cost due to a change in output level.
p.57
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What does Opportunity Cost represent?
The value of the next best alternative.
p.22
Business Economics: Application in Decision-Making
What is Business Economics?
Economics applied in decision-making.
p.21
Business Economics: Application in Decision-Making
What is the focus of Business Economics?
The application of economic theory and methodologies to business decision-making.
p.10
Notable Economists and Their Contributions
Who won the Nobel Prize in Economics in 2008?
Paul Krugman for his analysis of trade patterns and location of economic activity.
p.78
Leakages and Injections in the Circular Flow of Income
What is the significance of government borrowings in the circular flow model?
They provide additional funds for government spending, influencing overall economic activity.
p.4
Strands of Economics: Microeconomics and Macroeconomics
What does Macroeconomics focus on?
The economy as a whole, including inflation, unemployment, and economic growth.
p.18
Business Economics: Application in Decision-Making
What role does Business Economics play in production?
It aids in production and inventory management.
p.4
Strands of Economics: Microeconomics and Macroeconomics
What is the focus of Development Economics?
How economies in developing countries can be improved.
p.82
Circular Flow of Income: Models and Sectors
What happens during exports in foreign trade?
Goods and services are exported to other countries.
p.41
Business Economics: Application in Decision-Making
How do constraints affect decision-making?
They force individuals and organizations to prioritize their options based on available resources.
p.85
Circular Flow of Income: Models and Sectors
What does the circular flow model represent?
The flow of income in an economy.
p.82
Circular Flow of Income: Models and Sectors
What occurs during imports in foreign trade?
Goods and services are imported from other countries.
p.34
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
How is the present value of Rs.100 due two years later calculated?
V = Rs.100 / (1 + 0.10)^2 = Rs.100 / 1.21 = Rs.82.64
p.56
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What is a common example of scarcity in healthcare?
Limited hospital beds, healthcare workers, and medical supplies.
p.77
Circular Flow of Income: Models and Sectors
What is one of the primary roles of the government in the circular flow?
Levies taxes on households and firms.
p.65
Circular Flow of Income: Models and Sectors
What does the supply of goods and services by one sector represent for another sector?
It becomes the demand of the other sector.
p.52
Business Economics: Application in Decision-Making
What do governments and companies consider when allocating resources?
They balance needs, efficiency, and profit maximization.
p.15
Business Economics: Application in Decision-Making
What is a pricing strategy in monopolistic markets?
Setting prices based on market power and product differentiation.
p.58
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What are explicit costs in the context of attending college?
Tuition, books, school supplies, etc.
p.24
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What types of approaches does Business Economics utilize?
Both conceptual (theory) and metrical (quantitative techniques).
p.12
Business Economics: Application in Decision-Making
What is one key area within the scope of Business Economics?
Demand Analysis and Forecasting.
p.49
Positive vs. Normative Economics
What is a positive theoretical statement?
A statement that establishes hypotheses which can be empirically tested.
p.40
Strands of Economics: Microeconomics and Macroeconomics
What type of rivalry involves competition between consumers and producers?
Consumer-producer rivalry.
p.72
Circular Flow of Income: Models and Sectors
In the two-sector model, what do households provide to firms?
Factors of production such as labor, land, and capital.
p.74
Circular Flow of Income: Models and Sectors
What is the equilibrium condition in the two-sector model?
Y = C + S or Y = C + I, which implies S = I.
p.82
Circular Flow of Income: Models and Sectors
What is income inflow in the context of foreign trade?
When firms and governments receive payments for exports.
p.67
Circular Flow of Income: Models and Sectors
What is the primary function of the Household Sector?
To provide the factors of production.
p.40
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What is the definition of incentives?
Incentives affect how resources are used and how hard employees work.
p.12
Business Economics: Application in Decision-Making
How does Business Economics function as a decision science?
It guides business strategies.
p.49
Positive vs. Normative Economics
What characterizes normative economics?
It is based on subjective values.
p.56
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What causes seasonal shortages in industries?
Seasonal production and consumer demand.
p.67
Circular Flow of Income: Models and Sectors
What role do households play in the economy?
They are consumers who consume goods and services produced by firms.
p.61
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What is Opportunity Cost?
What is given up when a decision is made, including both explicit and implicit costs.
p.11
Business Economics: Application in Decision-Making
What is the definition of Business Economics?
Business Economics is the application of economic theory and methodology to business.
p.58
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What are implicit costs when considering college attendance?
The income you could have earned if you worked instead of attending college.
p.57
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What is Opportunity Cost?
The value of what you must give up when making a choice.
p.70
Circular Flow of Income: Models and Sectors
What are exports?
Goods and services produced domestically and sold abroad.
p.20
Business Economics: Application in Decision-Making
What are the deliverables at the end of the semester for the project?
Presentation and report submission.
p.58
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What does opportunity cost include?
Both explicit and implicit costs.
p.55
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What can lead to a housing shortage in urban areas?
High demand or natural disasters.
p.48
Positive vs. Normative Economics
How can understanding the distinction between positive and normative economics enhance policy-making?
By balancing facts with opinions.
p.12
Business Economics: Application in Decision-Making
What does Business Economics analyze regarding market dynamics?
Market Structure and Pricing Strategies.
p.58
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
Why might some individuals, like star athletes, choose not to attend college?
They face high implicit costs.
p.57
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What leads to Opportunity Cost?
Scarcity, because resources are limited.
p.42
Strands of Economics: Microeconomics and Macroeconomics
What does microeconomics focus on?
Individual economic units such as consumers, firms, and markets.
p.90
Leakages and Injections in the Circular Flow of Income
What do the variables S, T, M, I, G, and X stand for in the context of the balance equation?
S = Savings, T = Taxes, M = Imports, I = Investments, G = Government spending, X = Exports.
p.50
Positive vs. Normative Economics
What is a key limitation of Positive Economics?
It is based on assumptions like ceteris paribus, marginal analysis, and rational decision-making, which may oversimplify complex human behaviors.
p.36
Business Economics: Application in Decision-Making
What is an example of resource allocation according to the Equi-Marginal Principle?
Rs. 100 million capital allocation across three projects.
p.51
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What types of goods are considered scarce?
Goods like gold, diamonds, or specific knowledge.
p.83
Circular Flow of Income: Models and Sectors
How is Net Exports (NX) calculated?
NX = X - M (where X = Exports and M = Imports).
p.50
Positive vs. Normative Economics
How can the quality of data affect Positive Economics?
The quality of data can impact the accuracy and reliability of positive economic analysis.
p.45
Positive vs. Normative Economics
What does normative economics focus on?
The fairness and value of economic principles.
p.42
Strands of Economics: Microeconomics and Macroeconomics
What is the objective of microeconomics?
To investigate optimal allocation of resources and optimization goals of individual units.
p.36
Business Economics: Application in Decision-Making
What is the formula representing the Equi-Marginal Principle?
M P A = M P B = M P C = ... = M P N.
p.12
Business Economics: Application in Decision-Making
What is the nature of Business Economics?
It is applied economics that focuses on real-world applications.
p.17
Business Economics: Application in Decision-Making
What are some key areas where Business Economics is applied?
Optimizing production, setting prices, entering new markets, and managing resources.
p.48
Positive vs. Normative Economics
What do normative statements encourage in economic discussions?
Out-of-the-box thinking and can lay the groundwork for transformative changes.
p.88
Leakages and Injections in the Circular Flow of Income
What is an injection in the Circular Flow of Income?
An inflow of income to the circular flow.
p.37
Business Economics: Application in Decision-Making
What is the focus of the business decision-making process?
To analyze and choose among alternatives for effective business outcomes.
p.14
Business Economics: Application in Decision-Making
What does Marginal Analysis help businesses achieve?
Optimal resource allocation.
p.40
Strands of Economics: Microeconomics and Macroeconomics
What are the three types of rivalry mentioned?
Consumer-producer rivalry, consumer-consumer rivalry, and producer-producer rivalry.
p.51
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
How does scarcity affect consumer choices?
It limits the choices available to consumers.
p.43
Strands of Economics: Microeconomics and Macroeconomics
What does macroeconomics focus on?
Large economic aggregates.
p.45
Positive vs. Normative Economics
What does normative economics provide?
Solutions to economic issues based on value.
p.48
Positive vs. Normative Economics
What types of policies are often based on normative economics?
Policies related to international trade and welfare.
p.11
Business Economics: Application in Decision-Making
What distinguishes Business Economics from Traditional Economics?
Business Economics focuses on practical business problems.
p.31
Business Economics: Application in Decision-Making
What does unit contribution represent?
The per unit difference of incremental revenue from incremental cost.
p.55
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What happens to commodities like oil and gold when demand exceeds supply?
They become scarce, often leading to higher prices.
p.27
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What does Incremental Reasoning involve?
Evaluating the additional benefits and costs of a decision.
p.80
Circular Flow of Income: Models and Sectors
What role do households play in the three-sector circular flow model?
Households provide factors of production to businesses and receive income in return.
p.51
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
Why is understanding scarcity crucial in economics?
It helps in understanding the value of goods and services.
p.53
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What are renewable resources?
Natural elements that are consumed faster than they can be replenished, such as fresh water, fish, and trees.
p.73
Circular Flow of Income: Models and Sectors
What condition must be met to maintain the equilibrium level of the economy?
Total investment (I) must equal total saving (S).
p.43
Business Economics: Application in Decision-Making
Why is microeconomics important for policy formulation?
It influences individual markets.
p.39
Strands of Economics: Microeconomics and Macroeconomics
How does Microeconomics differ from Business Economics?
Microeconomics studies individual economic units, while Business Economics focuses on business-related decisions.
p.70
Circular Flow of Income: Models and Sectors
What does the foreign sector include?
Transactions with the rest of the world.
p.86
Leakages and Injections in the Circular Flow of Income
What are the three main types of leakages?
Saving, Taxes, and Imports.
p.31
Business Economics: Application in Decision-Making
What does contribution refer to in a business context?
The contribution of a unit of output to overheads and profit.
p.64
Circular Flow of Income: Models and Sectors
What do factor services generate in the real flow?
Money flows in the form of factor payments from firms to households.
p.70
Circular Flow of Income: Models and Sectors
What does foreign trade imply?
Net exports (exports minus imports).
p.3
Definition and Importance of Economics
What is a key challenge addressed by Economics?
Allocating limited resources to satisfy unlimited wants.
p.28
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What is the key criterion for a manager when making a decision?
Incremental revenue should exceed incremental cost.
p.39
Business Economics: Application in Decision-Making
What role does Business Economics play in a company?
It helps in making informed decisions regarding resource allocation, pricing, and production.
p.86
Leakages and Injections in the Circular Flow of Income
How do taxes function as a leakage?
Income paid by households and firms to the government, flowing to the government rather than the goods market.
p.12
Business Economics: Application in Decision-Making
What is another important aspect of Business Economics?
Production and Cost Analysis.
p.69
Circular Flow of Income: Models and Sectors
What is the primary function of the government sector?
To regulate the functioning of the economy.
p.31
Business Economics: Application in Decision-Making
What is economic profit?
The difference between total revenue (TR) and total opportunity cost (TC).
p.86
Leakages and Injections in the Circular Flow of Income
What role do imports play in the circular flow of income?
Payments made to the foreign sector for goods/services bought from them; an outflow from the economy.
p.20
Business Economics: Application in Decision-Making
What is one of the evaluation criteria for the project?
Active involvement in group work.
p.44
Strands of Economics: Microeconomics and Macroeconomics
What does microeconomics provide a foundation for?
Understanding individual behavior.
p.55
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
How can overuse affect resource availability?
It can lead to scarcity of resources like water, land, and animals, prompting restrictions and conservation efforts.
p.27
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What is the concept of Opportunity Cost?
The cost of forgoing the next best alternative when making a decision.
p.80
Circular Flow of Income: Models and Sectors
Who are the primary participants in the three-sector circular flow model?
Households, businesses, and the government.
p.53
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What are non-renewable resources?
Natural elements like oil and precious metals that cannot be replenished once depleted.
p.30
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What does the opportunity cost of using a resource include?
Both the explicit (or accounting) cost and the implicit cost of giving up the next-best alternative use of the resource.
p.90
Leakages and Injections in the Circular Flow of Income
What does a positive balance of (S - I) indicate?
It indicates that savings exceed investments.
p.55
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What causes a shortage of skilled labor?
Factors like war, education gaps, or labor strikes.
p.42
Strands of Economics: Microeconomics and Macroeconomics
What is the analytical focus of microeconomics?
Analyzes specific markets and individual segments of the economy.
p.61
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
How do Economic Profits differ from Accounting Profits?
Economic Profits account for opportunity costs, making them lower than Accounting Profits.
p.54
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What is structural scarcity?
Results from mismanagement or inequality of access, often driven by political factors or geographical location.
p.56
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What impact do weather and natural disasters have on scarcity?
They can reduce agricultural yield and disrupt supply chains.
p.46
Positive vs. Normative Economics
What is one way positive economics can be tested?
For accuracy due to the availability of facts.
p.28
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What does incremental revenue refer to?
Change in total revenue due to a change in output level.
p.47
Positive vs. Normative Economics
What is one advantage of normative economics?
It helps in identifying and classifying different aspects of economics as either good or bad.
p.61
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
Why is understanding the difference between economic and accounting profits important?
It is crucial for accurate financial and economic analysis.
p.72
Circular Flow of Income: Models and Sectors
What is the primary flow in the two-sector circular flow model?
The flow of goods and services from firms to households.
p.37
Definition and Importance of Economics
What role does scarcity play in economics?
Scarcity necessitates the allocation of resources and influences decision-making.
p.44
Strands of Economics: Microeconomics and Macroeconomics
How does macroeconomics relate to microeconomics?
It relies on microeconomic foundations for aggregate analysis.
p.45
Positive vs. Normative Economics
How does positive economics determine future situations?
By relying on past and present data.
p.26
Business Economics: Application in Decision-Making
What is the scope of Business Economics?
It includes objectives of a firm, demand analysis, production and cost, competition, pricing, profit, investment, and market strategy.
p.20
Business Economics: Application in Decision-Making
What does the creativity criterion evaluate?
Innovative solutions and ideas.
p.35
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What does 'i' represent in the present value formula?
'i' represents the interest rate.
p.71
Circular Flow of Income: Models and Sectors
What role does the household sector play in the Circular Flow of Income?
The only buyer of goods and services produced by firms and the only supplier of factors of production.
p.80
Circular Flow of Income: Models and Sectors
How do businesses interact with households in the three-sector model?
Businesses produce goods and services that households consume.
p.43
Strands of Economics: Microeconomics and Macroeconomics
What does macroeconomics analyze?
Total employment, price levels, national output, and aggregate consumption.
p.90
Leakages and Injections in the Circular Flow of Income
What does a positive balance of (G - T) indicate?
It indicates that government spending exceeds taxes.
p.30
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What are implicit costs?
The value of the next-best alternative that is forgone when a decision is made.
p.26
Demand Analysis and Demand Forecasting
What is demand forecasting?
The process of estimating future demand for a product or service.
p.42
Strands of Economics: Microeconomics and Macroeconomics
What does macroeconomics analyze?
Broad aggregates like total consumption, investment, and employment.
p.79
Circular Flow of Income: Models and Sectors
How is aggregate demand measured in a closed economy?
By adding consumption, investment, and government expenditure.
p.48
Positive vs. Normative Economics
How can combining normative and positive economics be beneficial?
It can help establish and achieve new economic goals and perspectives.
p.37
Strands of Economics: Microeconomics and Macroeconomics
What are the two major classifications in economics?
Microeconomics and Macroeconomics.
p.44
Strands of Economics: Microeconomics and Macroeconomics
What significant work marked the emergence of macroeconomics as a distinct field?
Keynes’ General Theory in 1936.
p.45
Positive vs. Normative Economics
What is the primary purpose of positive economics?
Describing different economic phenomena.
p.70
Circular Flow of Income: Models and Sectors
What are imports?
Goods and services produced abroad and sold domestically.
p.11
Business Economics: Application in Decision-Making
How does Business Economics optimize resource allocation?
By applying economic principles to make efficient use of resources.
p.31
Business Economics: Application in Decision-Making
What are some reasons for profit in a business?
Innovation, risk, and monopoly power.
p.38
Business Economics: Application in Decision-Making
What is the final step in the business decision-making process?
Monitor and evaluate results.
p.49
Positive vs. Normative Economics
What is often required for effective policy-making?
Integrating both positive and normative economic statements.
p.73
Circular Flow of Income: Models and Sectors
What is the consequence of firms decreasing production due to reduced sales?
A fall in household income, creating a cycle of reduction.
p.71
Circular Flow of Income: Models and Sectors
What is a closed economy?
An economy that does not participate in international trade.
p.11
Business Economics: Application in Decision-Making
What principles does Business Economics integrate?
Micro and macroeconomic principles.
p.47
Positive vs. Normative Economics
What pragmatic benefit does normative economics provide?
It provides prescriptive pragmatics to maximize the utility of options.
p.60
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What is the economic profit for Farmer Jones?
$100 ($400 revenue - $300 total cost).
p.44
Business Economics: Application in Decision-Making
What does macroeconomics guide in terms of government policies?
National income, employment, and inflation.
p.30
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What are explicit costs?
The direct, out-of-pocket expenses associated with a decision.
p.80
Circular Flow of Income: Models and Sectors
What is the government's role in the three-sector circular flow model?
The government collects taxes and provides public goods and services.
p.74
Circular Flow of Income: Models and Sectors
What does the equation S = I imply?
Saving equals Investment.
p.27
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What is the significance of Time Perspective in decision-making?
It helps in evaluating the long-term versus short-term effects of decisions.
p.71
Circular Flow of Income: Models and Sectors
How do households earn income in this model?
By selling factors of production to firms.
p.11
Business Economics: Application in Decision-Making
What is one importance of Business Economics?
It helps in decision-making under constraints.
p.19
Business Economics: Application in Decision-Making
What type of feedback do the quizzes provide?
Immediate feedback to enhance understanding.
p.88
Leakages and Injections in the Circular Flow of Income
What is the first main type of injection?
Investment (I), which is total expenditure by firms on capital expansion.
p.77
Circular Flow of Income: Models and Sectors
What is the income outflow from the government to households and firms?
Subsidies and transfer payments.
p.19
Business Economics: Application in Decision-Making
How are the quizzes structured?
Short and focused on specific topics.
p.56
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
How do fixed roadways contribute to scarcity?
Congestion and limited infrastructure can delay deliveries.
p.86
Leakages and Injections in the Circular Flow of Income
How do leakages affect the volume of income in the circular flow?
They reduce the volume of income in the circular flow.
p.71
Circular Flow of Income: Models and Sectors
What does the Circular Flow of Income model assume?
A closed economy with only two sectors: households and firms.
p.20
Business Economics: Application in Decision-Making
What does the understanding criterion assess in the project?
Application of concepts and analysis.
p.53
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What are the two main types of resources impacted by scarcity?
Non-renewable resources and renewable resources.
p.60
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What is the accounting profit for Farmer Jones?
$300 ($400 revenue - $100 explicit cost).
p.72
Circular Flow of Income: Models and Sectors
What is the secondary flow in the two-sector circular flow model?
The flow of payments from households to firms for goods and services.
p.37
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What is opportunity cost?
The cost of the next best alternative foregone when making a decision.
p.36
Business Economics: Application in Decision-Making
What condition must be met for the Equi-Marginal Principle to apply?
Firms have limited investible resources.
p.46
Positive vs. Normative Economics
What is a limitation regarding the consistency of facts in positive economics?
There is no guarantee that facts will remain consistent in the future.
p.35
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
How is the present value for each year calculated?
By multiplying the income for that year by (1 + i) raised to the power of the year number.
p.71
Circular Flow of Income: Models and Sectors
What does the household sector do with its entire income?
Spends it on purchasing goods and services from firms, implying no saving or investment.
p.50
Positive vs. Normative Economics
What is a limitation of Normative Economics related to ethical principles?
Ethical principles and moral standards vary globally, leading to potential disagreements.
p.71
Circular Flow of Income: Models and Sectors
What is the role of the firms sector in the Circular Flow of Income?
The only producer of goods and services.
p.90
Leakages and Injections in the Circular Flow of Income
What does a positive balance of (X - M) indicate?
It indicates that exports exceed imports.
What is the significance of competition in Business Economics?
It influences pricing, output decisions, and overall market dynamics.
p.79
Circular Flow of Income: Models and Sectors
What is aggregate supply?
The total supply of goods and services that firms are willing to sell in an economy at a given price level.
p.53
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What is scarcity?
Scarcity occurs when the demand for a natural resource, product, or service exceeds the supply.
p.60
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What is Farmer Jones' opportunity cost of producing wheat?
$200 in forgone income from not giving banjo lessons.
p.14
Business Economics: Application in Decision-Making
Why is forecasting important in business?
It helps anticipate market needs and predict business cycles.
p.37
Positive vs. Normative Economics
What is the difference between positive and normative economics?
Positive economics deals with what is, while normative economics deals with what ought to be.
p.53
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What does scarcity often indicate about resource use?
It indicates that the current level of resource use is unsustainable in the long-term.
p.35
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What is the formula for calculating the present worth of a stream of income over n years?
V = R1(1 + i) + R2(1 + i)² + R3(1 + i)³ + ... + Rn(1 + i)ⁿ
p.30
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What does opportunity cost represent?
The benefits foregone by choosing one alternative over another.
p.77
Circular Flow of Income: Models and Sectors
What may the government do if its revenue falls short of expenditure?
Borrow through financial markets.
p.69
Circular Flow of Income: Models and Sectors
How does the government sector earn revenue?
From tax and non-tax sources.
p.42
Strands of Economics: Microeconomics and Macroeconomics
What is the main concern of macroeconomics?
Aggregate economic activity, including total output, national income, and employment.
p.46
Positive vs. Normative Economics
Why might decisions based on positive economics not be equitable?
Because they do not impact everyone equally.
p.44
Business Economics: Application in Decision-Making
What type of policies does microeconomics influence?
Policies on individual markets and resource allocation.
p.73
Circular Flow of Income: Models and Sectors
How can equilibrium be maintained in the Circular Flow of Income?
By crediting household savings to firms for investment.
p.26
Business Economics: Application in Decision-Making
What are the objectives of a firm in Business Economics?
To maximize profit, ensure sustainability, and achieve growth.
p.47
Positive vs. Normative Economics
What is a major drawback of normative economics?
It lacks factual verification, making it difficult to confirm the accuracy of opinions.
p.36
Business Economics: Application in Decision-Making
What does diminishing marginal productivity imply in the context of the Equi-Marginal Principle?
Investment in various alternative uses is subject to diminishing returns.
p.80
Circular Flow of Income: Models and Sectors
What is the significance of the circular flow model?
It illustrates how money and resources flow through the economy.
p.43
Business Economics: Application in Decision-Making
What foundation does macroeconomics provide?
For government policies to manage the overall economy.
p.27
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
How does Contribution relate to economic decision-making?
It refers to the amount that contributes to covering fixed costs and generating profit.
p.79
Circular Flow of Income: Models and Sectors
What is aggregate demand?
The total demand for final goods and services in an economy at a given time and price level.
p.26
Product Policy, Sales Promotion, and Market Strategy
What does product policy involve?
Decisions regarding product design, features, and branding.
p.49
Positive vs. Normative Economics
How does positive economics differ from normative economics?
Positive economics is based on objective analysis rather than subjective opinions.
p.73
Circular Flow of Income: Models and Sectors
What does saving by the household sector imply in the Circular Flow of Income?
A monetary withdrawal from the circular flow of income.
p.30
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What is opportunity cost?
The cost of the explicit and implicit resources that are forgone when a decision is made.
p.90
Leakages and Injections in the Circular Flow of Income
What does the equation S + T + M = I + G + X represent in an open economy?
It represents the balance of leakages and injections.
p.49
Positive vs. Normative Economics
Do positive and normative economics have their own merits?
Yes, both have their own merits and limitations.
p.36
Business Economics: Application in Decision-Making
What does the Equi-Marginal Principle state?
Resources should be allocated where marginal productivity is equalized.
p.88
Leakages and Injections in the Circular Flow of Income
What does Government Expenditure (G) include?
Total government expenditure on goods/services, subsidies to firms, and transfer payments to households.
p.46
Positive vs. Normative Economics
What is a drawback of positive economics related to human behavior?
Most people are governed by emotions, which can overshadow positive economics.
p.19
Business Economics: Application in Decision-Making
What is the nature of the written assignment?
Based on a small project requiring application of concepts learned in class.
p.35
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What does R represent in the present value calculation?
R represents the income received in each year.
p.88
Leakages and Injections in the Circular Flow of Income
What are exports (X) in the context of injections?
Payments from the foreign sector for domestic goods, representing an inflow of income to the financial market.
p.90
Leakages and Injections in the Circular Flow of Income
What is the alternative form of the balance equation (S - I) = (G - T) + (X - M) used for?
It shows the relationship between savings and investments, government spending and taxes, and exports and imports.
p.19
Business Economics: Application in Decision-Making
What does the written assignment encourage?
Independent research and analysis.
p.55
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What factors can lead to water scarcity?
Environmental changes and poor infrastructure.
p.50
Positive vs. Normative Economics
What is a limitation of Positive Economics regarding real-life scenarios?
It may not fully capture the complexities and nuances of real-life economic scenarios.
p.27
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What is the Discounting Principle?
A method used to determine the present value of future cash flows.
p.35
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What does the summation notation n X k =1 Rk(1 + i)k represent?
It represents the sum of present values for n years.
p.27
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What is the Equi-Marginal Principle?
The principle that states resources should be allocated in such a way that the marginal utility is equal across all uses.
p.47
Positive vs. Normative Economics
What challenge do decision-makers face in normative economics?
They must rely on assumptions with incomplete knowledge.
p.45
Positive vs. Normative Economics
What type of data does positive economics use?
Data and facts for behavioral assessment.
p.80
Circular Flow of Income: Models and Sectors
What does the three-sector model in the circular flow represent?
It represents the interactions between households, businesses, and the government.
p.29
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What does incremental reasoning help a firm evaluate?
The additional revenue and costs from a specific order.
p.73
Circular Flow of Income: Models and Sectors
How does household saving affect firms in the Circular Flow of Income?
It leads to a decrease in sales for firms, causing excess production over sales.
p.51
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
Why are scarce goods often more valuable?
Because sellers can set higher prices due to limited availability.
p.14
Business Economics: Application in Decision-Making
What is Demand Forecasting?
Anticipating market needs.
p.28
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
When should a course of action be pursued according to incremental reasoning?
Up to the point where its incremental benefits equal its incremental costs.
p.47
Positive vs. Normative Economics
How does normative economics benefit individual expression?
It allows people the freedom to express their opinions.
p.30
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What is an example of opportunity cost?
The interest that could have been earned if funds were invested in the next best channel instead of one's own business.
p.14
Business Economics: Application in Decision-Making
How do Economic Indicators assist businesses?
They help predict business cycles.
p.69
Circular Flow of Income: Models and Sectors
What is the purpose of government expenditure?
To provide essential public services.
p.43
Strands of Economics: Microeconomics and Macroeconomics
What does microeconomics analyze?
Prices, outputs, and resource allocation in specific markets.
p.27
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What is the Time Value of Money?
The idea that money available now is worth more than the same amount in the future due to its potential earning capacity.
p.20
Business Economics: Application in Decision-Making
What is assessed under the presentation criterion?
Clarity and effectiveness of communication.
p.36
Business Economics: Application in Decision-Making
What is another condition for applying the Equi-Marginal Principle?
Resources have alternative uses.
p.26
Demand Analysis and Demand Forecasting
What is demand analysis?
The study of consumer behavior to understand how demand for a product changes with price and other factors.
p.60
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
What effect does hiring a laborer have on Farmer Jones' economic profit?
It would increase his economic profit despite higher explicit costs.
p.71
Circular Flow of Income: Models and Sectors
How do firms generate income in the Circular Flow of Income model?
By selling goods and services to households.
How do pricing and output decisions affect a firm?
They determine revenue, market share, and profitability.
p.26
Product Policy, Sales Promotion, and Market Strategy
What is the purpose of sales promotion in Business Economics?
To increase product awareness and stimulate demand.
p.26
Product Policy, Sales Promotion, and Market Strategy
What is market strategy?
A plan to reach target customers and achieve competitive advantage.
p.37
Fundamental Concepts: Opportunity Cost and Incremental Reasoning
How is opportunity cost calculated?
By evaluating the benefits of the next best alternative that is not chosen.
p.45
Positive vs. Normative Economics
What type of relationship does positive economics discuss?
Cause and effect relationship.
p.42
Strands of Economics: Microeconomics and Macroeconomics
What does macroeconomics study?
The functioning of the economy as a whole, identifying determinants of aggregate outcomes.
p.47
Positive vs. Normative Economics
Why can normative economics be problematic for decision-makers?
It relies on individual opinions, which often lack factual accuracy.
What does production and cost analysis involve?
Examining the relationship between production levels and the costs incurred.
p.50
Positive vs. Normative Economics
Why is it difficult to apply Normative Economics uniformly?
It lacks a universal set of value judgments, making it difficult to apply uniformly across different cultures and societies.
p.50
Positive vs. Normative Economics
What is a consequence of the subjective nature of Normative Economics?
It can lead to conflicting opinions and interpretations.
p.71
Circular Flow of Income: Models and Sectors
What is the equality established in the Circular Flow of Income model?
Income of producers = Income of households = Consumption expenditure of households.
p.26
Investment and Capital Budgeting
What is investment and capital budgeting?
The process of planning and managing a firm's long-term investments.
p.47
Positive vs. Normative Economics
What issue arises from the multiple variations provided by normative economics?
It can lead to unrealistic considerations that may not apply to real life.
What is the role of profit in a firm?
Profit serves as a measure of success and a source of funds for reinvestment.
