p.1
Definition and Nature of Economics
Why has the study of economics become increasingly important in recent times?
Due to the growing number of countries facing economic problems.
p.9
Central Economic Questions
Why are taxes considered essential for public expenditures?
Because public expenditures tend to grow with the national product, and taxes finance these expenditures.
p.18
Economic Growth and Its Implications
What can cause an economy to grow?
An increase in productivity in one sector, such as improved technology.
p.13
Basic Economic Problems: Scarcity, Choice, and Opportunity Cost
What is the focus of Unit 2 in economics?
The basic economic problems, central problems of economies, and economic systems.
p.25
Basic Economic Problems: Scarcity, Choice, and Opportunity Cost
What are basic economic problems?
Problems facing an economy due to the scarcity of resources.
p.4
Branches of Economics: Microeconomics and Macroeconomics
What is the fundamental problem of microeconomics?
Resource allocation or the problem of price determination.
p.4
Branches of Economics: Microeconomics and Macroeconomics
What are some examples of aggregate economic variables studied in macroeconomics?
Total employment, total output, national income, total investment, total consumption.
p.10
Definition and Nature of Economics
What is the main focus of economics?
The efficient allocation of scarce resources to fulfill unlimited human needs.
p.19
Central Economic Questions
What is the first basic economic question?
What goods and services are to be produced?
p.25
Production Possibilities Frontier (PPF)
What concept does the PPC describe?
Scarcity, choice, and opportunity cost.
p.18
Basic Economic Problems: Scarcity, Choice, and Opportunity Cost
Define 'choice' in economics.
The decision made by individuals or societies regarding the allocation of scarce resources.
p.3
Definition and Nature of Economics
Why is there a lack of uniformity in defining economics?
Because views about the subject matter have shifted over time.
p.1
Positive vs. Normative Economics
Is economics considered a positive science, a normative science, or both?
Both, as it involves objective analysis and subjective value judgments.
p.3
Definition and Nature of Economics
How do some economists view economics?
As a science or as an art.
p.4
Branches of Economics: Microeconomics and Macroeconomics
What is the fundamental problem of macroeconomics?
Investigating the interrelationships of numerous aggregate economic variables and their fluctuations over time.
p.17
Basic Economic Problems: Scarcity, Choice, and Opportunity Cost
What does movement along the PPF curve indicate?
It denotes a shift in preference, reflecting the concept of choice.
p.8
Decision-Making Units in an Economy
What are the basic decision-making units of an economy?
Households, business firms, and the government.
p.18
Basic Economic Problems: Scarcity, Choice, and Opportunity Cost
What is 'opportunity cost'?
The value of the next best alternative that is forgone when making a choice.
p.18
Basic Economic Problems: Scarcity, Choice, and Opportunity Cost
Define 'scarcity' in economic terms.
The limited availability of resources to meet unlimited wants and needs.
p.2
Definition and Nature of Economics
What are the key components of economics as a science of choice?
It studies how people choose to use scarce productive resources like land, labor, and equipment.
p.13
Types of Economic Systems: Traditional, Capitalist, Command, and Mixed
What are the main types of economic systems?
Capitalism, command economy, mixed economy, and traditional economy.
p.10
Branches of Economics: Microeconomics and Macroeconomics
What does microeconomics study?
The economic behavior of individual economic units and variables.
p.2
Definition and Nature of Economics
Why has the importance of economics increased in recent years?
In response to worldwide economic problems such as poverty, unemployment, inflation, and recession.
p.7
Methods of Studying Economics: Deductive and Inductive
What does deduction do in economic reasoning?
Generates knowledge of specific instances from general knowledge.
p.7
Positive vs. Normative Economics
What is positive economics concerned with?
The analysis of facts and describing the world as it is.
p.8
Decision-Making Units in an Economy
What types of enterprises do business firms include?
Both private and government enterprises.
p.7
Positive vs. Normative Economics
How can disagreements on positive statements be resolved?
By referring to the facts.
p.13
Types of Economic Systems: Traditional, Capitalist, Command, and Mixed
What is a command economy?
An economic system where the government makes all decisions regarding production and distribution.
p.15
Basic Economic Problems: Scarcity, Choice, and Opportunity Cost
What is an example of opportunity cost in production?
If resources can produce either one meter of cloth or 20 computers, the opportunity cost of one meter of cloth is the value of 20 computers.
p.22
Types of Economic Systems: Traditional, Capitalist, Command, and Mixed
What is a central feature of a capitalist economy?
The Right to Private Property.
p.5
Basic Economic Problems: Scarcity, Choice, and Opportunity Cost
What fundamental problems do microeconomics and macroeconomics help to solve?
Microeconomics addresses what, how, and for whom to produce; macroeconomics addresses full employment of resources.
p.6
Methods of Studying Economics: Deductive and Inductive
What is the deductive method in economics?
A method that proceeds from general to particular, reasoning from principles to specific facts.
p.1
Branches of Economics: Microeconomics and Macroeconomics
What are the two major branches of economics?
Microeconomics and Macroeconomics.
p.1
Methods of Studying Economics: Deductive and Inductive
What methods are used to study economics?
Deductive and Inductive methods.
p.9
Central Economic Questions
What is the role of taxes in sustainable development?
To sustain the activities of public investments necessary for sustainable development.
p.17
Production Possibilities Frontier (PPF)
What does the PPF represent in economics?
The Production Possibilities Frontier represents the maximum output combinations of two goods that can be produced with available resources.
p.13
Basic Economic Problems: Scarcity, Choice, and Opportunity Cost
What does 'efficient allocation' mean?
The optimal distribution of resources to meet needs and wants.
p.3
Definition and Nature of Economics
What does economics as an art focus on?
Providing principles and methods to solve economic problems like unemployment, poverty, and inflation.
p.15
Basic Economic Problems: Scarcity, Choice, and Opportunity Cost
What is opportunity cost?
The amount or value of the next best alternative that must be sacrificed to obtain one more unit of a product.
p.14
Basic Economic Problems: Scarcity, Choice, and Opportunity Cost
Why is efficient resource allocation necessary?
To address the scarcity of natural and human-made resources.
p.21
Types of Economic Systems: Traditional, Capitalist, Command, and Mixed
What are the main types of economic systems?
Traditional economy, capitalist economy, command economy, and mixed economy.
p.7
Positive vs. Normative Economics
What characterizes normative economics?
It involves value judgments and opinions that cannot be proved or disproved with facts.
p.20
Central Economic Questions
What is the problem of distribution in economics?
It relates to how a material product is distributed among different members of society.
p.17
Economic Growth and Its Implications
How is economic growth represented on the PPF?
By an outward shift of the PPF.
p.10
Decision-Making Units in an Economy
How do business firms operate in relation to households?
They hire services of factors of production from households to produce commodities.
p.12
Definition and Nature of Economics
Why is the study of economics considered extremely useful and important?
It helps individuals and societies make informed decisions regarding resource allocation and understanding market dynamics.
p.1
Definition and Nature of Economics
What skills does the study of economics enhance?
Logical thinking, analytical skills, observation, and judgment.
p.4
Branches of Economics: Microeconomics and Macroeconomics
What are the two major branches of economics?
Microeconomics and Macroeconomics.
p.16
Production Possibilities Frontier (PPF)
What are the characteristics of points on the production possibilities frontier?
All points on the curve are both attainable and efficient.
p.2
Definition and Nature of Economics
What does economics study?
The efficient allocation of scarce resources to maximize the fulfillment of human needs.
p.9
Decision-Making Units in an Economy
What are decision-making units in an economy?
Individuals or firms that make choices regarding the allocation of resources.
p.1
Definition and Nature of Economics
What is the nature of economics?
It deals with the efficient allocation of scarce resources.
p.14
Basic Economic Problems: Scarcity, Choice, and Opportunity Cost
What is the difference between scarcity and shortage?
Scarcity is a universal and endless problem, while a shortage is a specific and short-term issue.
p.4
Branches of Economics: Microeconomics and Macroeconomics
What are some emerging branches of economics mentioned?
Development economics, environmental economics, industrial economics, international economics, labor economics, and more.
p.20
Basic Economic Problems: Scarcity, Choice, and Opportunity Cost
What factors influence the choice between labour-intensive and capital-intensive techniques?
The available supplies of diverse production factors and their relative prices.
p.19
Basic Economic Problems: Scarcity, Choice, and Opportunity Cost
What is meant by the problem of allocation of resources?
It refers to deciding the type and quantity of goods to be produced in an economy.
p.19
Basic Economic Problems: Scarcity, Choice, and Opportunity Cost
What are the two groups of techniques of production?
Labour-intensive techniques and capital-intensive techniques.
p.22
Types of Economic Systems: Traditional, Capitalist, Command, and Mixed
What is the principle of consumer sovereignty?
Consumers can buy goods and services that suit their tastes and preferences.
p.6
Methods of Studying Economics: Deductive and Inductive
What is the fundamental objective of economics?
To establish valid generalisations about certain aspects of human behaviour.
p.4
Branches of Economics: Microeconomics and Macroeconomics
What does microeconomics focus on?
The economic behavior of individual decision-making units such as households, firms, and governments.
p.7
Methods of Studying Economics: Deductive and Inductive
What are the two complementary methods used in economics?
Deductive and inductive methods.
p.14
Basic Economic Problems: Scarcity, Choice, and Opportunity Cost
How is scarcity defined in economics?
Scarcity refers to the limited supply of economic resources relative to unlimited human wants.
p.3
Definition and Nature of Economics
What characterizes economics as a science?
It produces a systematic and organized body of knowledge linking causes and effects.
p.10
Branches of Economics: Microeconomics and Macroeconomics
What are the two main branches of economics?
Microeconomics and Macroeconomics.
p.7
Positive vs. Normative Economics
What type of questions does positive economics answer?
Questions like what is, what was, or what will be.
p.17
Basic Economic Problems: Scarcity, Choice, and Opportunity Cost
What does the law of increasing opportunity cost state?
As production of a product increases, the opportunity cost per unit of additional output also increases.
p.22
Types of Economic Systems: Traditional, Capitalist, Command, and Mixed
What is a key characteristic of barter in traditional economies?
It can only occur between groups that do not compete.
p.17
Economic Growth and Its Implications
What conditions lead to economic growth?
An increase in the quantity and quality of economic resources or advances in technology.
p.12
Decision-Making Units in an Economy
What best describes firms?
D. All of the above (They are the main buyers of factors of production, leading producers of commodities, consist of both private and government enterprises).
p.21
Types of Economic Systems: Traditional, Capitalist, Command, and Mixed
How do nomadic hunter-gatherers operate in a traditional economy?
They migrate with the seasons to find food and compete for scarce natural resources.
p.11
Positive vs. Normative Economics
Which of the following would best be described as a positive statement about economics?
B. Countries normally experience higher unemployment during recessions.
p.12
Decision-Making Units in an Economy
What are the main features of the various decision-making units of an economy?
They include households, firms, and government, each playing distinct roles in production, consumption, and regulation.
p.16
Basic Economic Problems: Scarcity, Choice, and Opportunity Cost
What does specialization refer to in production?
Some inputs are better adapted to the production of one good than to the production of another.
p.19
Basic Economic Problems: Scarcity, Choice, and Opportunity Cost
What are the basic economic problems faced by an economy?
They are the problems of what goods and services to produce, how to produce them, and for whom to produce.
p.25
Production Possibilities Frontier (PPF)
What does the Production Possibility Curve (PPC) depict?
All possible combinations of the maximum output that can be produced in an economy with given resources and technology.
p.19
Basic Economic Problems: Scarcity, Choice, and Opportunity Cost
What does the first basic economic question imply?
It implies that every economy must decide on the type and quantity of goods to be produced.
p.14
Basic Economic Problems: Scarcity, Choice, and Opportunity Cost
What does opportunity cost refer to?
The cost of the next best alternative foregone when making a choice.
p.13
Basic Economic Problems: Scarcity, Choice, and Opportunity Cost
What is opportunity cost?
The value of the next best alternative foregone when making a choice.
p.10
Methods of Studying Economics: Deductive and Inductive
What are the two methods of logical reasoning used in economics?
Deductive and Inductive methods.
p.15
Basic Economic Problems: Scarcity, Choice, and Opportunity Cost
What happens when the opportunity cost of an activity increases?
People substitute other activities in its place.
p.21
Types of Economic Systems: Traditional, Capitalist, Command, and Mixed
What types of activities do traditional economies depend on?
Agriculture, fishing, hunting, and gathering.
p.10
Decision-Making Units in an Economy
What are the basic decision-making units in an economy?
Households, business firms, and the government.
p.10
Decision-Making Units in an Economy
What do households primarily own in an economy?
Factors of production: land, labor, capital, and entrepreneurship.
p.23
Types of Economic Systems: Traditional, Capitalist, Command, and Mixed
What defines a mixed economy?
A combination of both capitalism and socialism, with private and public ownership.
p.5
Methods of Studying Economics: Deductive and Inductive
What are the main tools used in macroeconomics?
Aggregate demand and aggregate supply of an economy as a whole.
p.6
Methods of Studying Economics: Deductive and Inductive
What is the inductive method in economics?
A method that reasons from the particular to the general, developing theories based on observations.
p.6
Methods of Studying Economics: Deductive and Inductive
How does the inductive method approach economic problems?
By collecting comprehensive data about prevailing economic conditions and forming hypotheses.
p.16
Basic Economic Problems: Scarcity, Choice, and Opportunity Cost
What does production efficiency indicate?
The maximum level of output a manufacturer can produce without lowering the output of another product.
p.16
Production Possibilities Frontier (PPF)
What does a point inside the production possibilities curve represent?
It is attainable but inefficient.
p.8
Decision-Making Units in an Economy
What do business firms do in an economy?
They hire factors of production from households to produce commodities.
p.16
Production Possibilities Frontier (PPF)
What does the production possibilities table illustrate?
The alternative production possibilities of food and computers given limited resources.
p.18
Basic Economic Problems: Scarcity, Choice, and Opportunity Cost
What is the main difference between scarcity and shortage of resources?
Scarcity is a permanent condition due to limited resources, while a shortage is a temporary situation where demand exceeds supply.
p.17
Basic Economic Problems: Scarcity, Choice, and Opportunity Cost
What is the concept of scarcity as described by the PPF?
Scarcity means that even with optimal resource use, a society cannot produce an infinite amount of output.
p.14
Basic Economic Problems: Scarcity, Choice, and Opportunity Cost
What must be done due to the problem of scarcity?
Choices must be made regarding the allocation of limited resources.
p.8
Decision-Making Units in an Economy
What portion of their income do households typically spend?
An enormous portion on purchasing goods and services.
p.19
Central Economic Questions
What is the third basic economic question?
For whom goods and services are to be produced?
p.15
Production Possibilities Frontier (PPF)
What does the Production Possibilities Frontier (PPF) represent?
The various possible combinations of goods and services that society can produce given its resources and technology.
p.20
Central Economic Questions
What should an economy focus on to benefit the maximum number of people?
Producing necessary goods for the whole population before luxury goods.
p.5
Branches of Economics: Microeconomics and Macroeconomics
What is macroeconomics?
The study of an economy as a whole, focusing on broad, economy-wide aggregates.
p.22
Types of Economic Systems: Traditional, Capitalist, Command, and Mixed
What motivates individuals in a capitalist economy?
Self-interest guides and motivates individuals to strive for economic gain.
p.5
Branches of Economics: Microeconomics and Macroeconomics
Can microeconomics and macroeconomics be studied independently?
No, they are complementary to each other.
p.18
Economic Growth and Its Implications
What is asymmetric growth in an economy?
It refers to growth due to an increase in productivity in one sector, illustrated by a shift of the PPF along the Y-axis or X-axis.
p.3
Basic Economic Problems: Scarcity, Choice, and Opportunity Cost
What is the primary objective of economics?
To study how to satisfy unlimited human needs through efficient allocation of scarce resources.
p.4
Branches of Economics: Microeconomics and Macroeconomics
What does macroeconomics examine?
The aggregate behavior of all decision-making units in an economy and the interrelations among various aggregate economic variables.
p.25
Basic Economic Problems: Scarcity, Choice, and Opportunity Cost
What causes the fundamental economic problem?
The imbalance between unlimited human wants and limited available resources.
p.8
Decision-Making Units in an Economy
How does the government fund its activities?
Mainly through taxes levied on households and business firms.
p.10
Branches of Economics: Microeconomics and Macroeconomics
What does macroeconomics focus on?
The functions of the economy as a whole.
p.19
Basic Economic Problems: Scarcity, Choice, and Opportunity Cost
What does the second basic economic question involve?
It involves choosing between alternative methods or techniques of production.
p.21
Types of Economic Systems: Traditional, Capitalist, Command, and Mixed
What characterizes a traditional economy?
It relies on customs, history, and time-honored beliefs to guide economic decisions.
p.10
Positive vs. Normative Economics
What is normative economics?
It entails value judgment in applying knowledge to solve problems.
p.5
Central Economic Questions
What is the central problem addressed by microeconomics?
Price determination and allocation of resources.
p.23
Types of Economic Systems: Traditional, Capitalist, Command, and Mixed
What sectors coexist in a mixed economy?
Public and private sectors.
p.11
Branches of Economics: Microeconomics and Macroeconomics
Microeconomics concerns itself with all of the following topics except:
D. The behaviour and operation of the economy as a whole.
p.12
Basic Economic Problems: Scarcity, Choice, and Opportunity Cost
Why does economics deal with the allocation and efficient utilization of scarce resources?
Because resources are limited, and economics aims to maximize utility and efficiency in their use.
p.6
Methods of Studying Economics: Deductive and Inductive
What generalisation can be made from observing grain prices during harvest?
Keeping other factors constant, an increase in supply leads to a fall in prices.
p.6
Positive vs. Normative Economics
What distinguishes positive economics from normative economics?
Positive economics deals with what is, while normative economics deals with what ought to be.
p.9
Central Economic Questions
What is the primary purpose of taxes imposed by the government?
To raise revenue for government expenditures.
p.9
Central Economic Questions
What is the primary goal of a national tax system?
To generate revenues to pay for government expenditures.
p.8
Decision-Making Units in an Economy
What do households own in an economy?
The factors of production: land, labor, capital, and entrepreneurship.
p.8
Decision-Making Units in an Economy
How do households earn income?
By selling factor services to producers in the form of rent, wages, interest, and profit.
p.7
Methods of Studying Economics: Deductive and Inductive
What does induction do in economic reasoning?
Generates general conclusions from specific instances.
p.8
Decision-Making Units in an Economy
What is the role of the government in an economy?
To purchase goods and services from producers and provide free services to the people.
p.2
Definition and Nature of Economics
Is there a completed definition of economics?
No, the definition is still under improvement and has evolved over time.
p.7
Positive vs. Normative Economics
What is normative economics focused on?
Questions about what the economy ought to be or should be.
p.25
Types of Economic Systems: Traditional, Capitalist, Command, and Mixed
What is an economic system?
A set of organizational and institutional arrangements established to answer basic economic questions.
p.10
Positive vs. Normative Economics
What is positive economics?
It deals with knowledge and facts.
p.15
Production Possibilities Frontier (PPF)
What are the assumptions needed to draw the PPF?
The quantity and quality of economic resources are fixed, there are two broad classes of output, and the economy is operating at full employment.
p.24
Economic Growth and Its Implications
What is the role of economic planning in a government?
To achieve coordinated rapid economic development using both private and public sectors.
p.22
Types of Economic Systems: Traditional, Capitalist, Command, and Mixed
What role does competition play in a capitalist economy?
Competition exists among sellers, buyers, and workers to attract customers, obtain goods, and secure jobs, respectively.
p.24
Types of Economic Systems: Traditional, Capitalist, Command, and Mixed
What are the main differences between capitalism and socialism?
Capitalism emphasizes private ownership and market-driven economies, while socialism focuses on collective ownership and planned economies.
p.16
Basic Economic Problems: Scarcity, Choice, and Opportunity Cost
What is resource allocation?
The distribution of finite resources to specified purposes selected from among several feasible possibilities.
p.2
Definition and Nature of Economics
What is the origin of the term 'economics'?
It is derived from the ancient Greek word 'oikonomia', meaning the management of a family or household.
p.1
Decision-Making Units in an Economy
What are the three decision-making units in an economy?
Households, business firms, and government.
p.13
Basic Economic Problems: Scarcity, Choice, and Opportunity Cost
What is an economic problem?
A situation where resources are limited and choices must be made.
p.9
Decision-Making Units in an Economy
What are the objectives of decision-making units in an economy?
To optimize resource allocation and maximize utility or profit.
p.1
Basic Economic Problems: Scarcity, Choice, and Opportunity Cost
What does the term 'scarcity' refer to in economics?
The limited availability of resources compared to unlimited wants.
p.20
Basic Economic Problems: Scarcity, Choice, and Opportunity Cost
What are the two types of production techniques mentioned?
Labour-intensive techniques and capital-intensive techniques.
p.21
Types of Economic Systems: Traditional, Capitalist, Command, and Mixed
What is an economic system?
A set of organizational and institutional arrangements established to answer basic economic questions.
p.19
Central Economic Questions
What is the second basic economic question?
How to produce goods and services?
p.8
Decision-Making Units in an Economy
What services does the government provide to satisfy people's needs?
Police, education, medical facilities, sanitation, and judicial services.
p.12
Positive vs. Normative Economics
Which of the following is a normative statement?
B. Poverty is something society should reduce.
p.23
Types of Economic Systems: Traditional, Capitalist, Command, and Mixed
What historical event marked the beginning of socialism in Russia?
The Great October Revolution in 1917.
p.19
Basic Economic Problems: Scarcity, Choice, and Opportunity Cost
Why are these basic economic questions important?
They are essential for addressing the scarcity of resources in any economic system.
p.22
Types of Economic Systems: Traditional, Capitalist, Command, and Mixed
What facilitates trading over long distances in evolving economies?
The creation of some form of money.
p.23
Types of Economic Systems: Traditional, Capitalist, Command, and Mixed
What role does the government play in a command economy?
The government has complete control over all economic activities.
p.5
Branches of Economics: Microeconomics and Macroeconomics
How does microeconomics differ from macroeconomics in terms of focus?
Microeconomics studies individual economic units, while macroeconomics studies the economy as a whole.
p.23
Types of Economic Systems: Traditional, Capitalist, Command, and Mixed
Which industries are typically set up in the public sector of a mixed economy?
Industries of national and strategic importance, such as heavy industry and defense services.
p.24
Types of Economic Systems: Traditional, Capitalist, Command, and Mixed
What is an economic system?
A structure that a society uses to allocate its resources and distribute goods and services.
p.2
Definition and Nature of Economics
What are the three main aspects derived from the definition of economics?
It studies scarce resources, allocation of resources, and emphasizes efficient allocation.
p.15
Basic Economic Problems: Scarcity, Choice, and Opportunity Cost
What does scarcity imply in economics?
Scarcity implies choice, which in turn implies an opportunity cost.
p.13
Basic Economic Problems: Scarcity, Choice, and Opportunity Cost
How do basic economic problems affect individuals and society?
They influence decision-making regarding resource allocation and priorities.
p.25
Basic Economic Problems: Scarcity, Choice, and Opportunity Cost
What is the law of increasing opportunity cost?
As we produce more of a product, the opportunity cost per unit of additional output increases.
p.15
Basic Economic Problems: Scarcity, Choice, and Opportunity Cost
How is opportunity cost measured?
In terms of goods and services, not in terms of money.
p.14
Basic Economic Problems: Scarcity, Choice, and Opportunity Cost
What is the production possibility frontier (PPF)?
A curve that illustrates the maximum feasible amount of two goods that can be produced with available resources.
p.22
Types of Economic Systems: Traditional, Capitalist, Command, and Mixed
How do traditional economies evolve?
They evolve once they start farming and settling down.
p.5
Branches of Economics: Microeconomics and Macroeconomics
What is microeconomics?
The study of individual decision-making units of an economy, like households and business firms.
p.15
Basic Economic Problems: Scarcity, Choice, and Opportunity Cost
What is the relationship between limited resources and human wants?
Limited resources lead to limited output, which contrasts with unlimited human wants.
p.20
Basic Economic Problems: Scarcity, Choice, and Opportunity Cost
What is the basic economic problem faced by all societies?
The problem of scarcity and how to allocate limited resources.
p.20
Basic Economic Problems: Scarcity, Choice, and Opportunity Cost
How does the fundamental economic problem affect individuals and firms?
It influences their decisions on resource allocation and production methods.
p.5
Central Economic Questions
What is the central problem addressed by macroeconomics?
Determination of the level of income and employment.
p.22
Types of Economic Systems: Traditional, Capitalist, Command, and Mixed
What is the government's role in a capitalist economy?
Limited involvement, mainly focusing on defense and law and order.
p.24
Types of Economic Systems: Traditional, Capitalist, Command, and Mixed
What similarities exist between capitalism and socialism?
Both systems aim to provide goods and services to meet the needs of society, though they differ in ownership and distribution methods.
p.3
Definition and Nature of Economics
What is the significance of systematic collection and analysis in economics?
It helps make predictions about the future.
p.20
Basic Economic Problems: Scarcity, Choice, and Opportunity Cost
What characterizes a capital-intensive technique?
It involves the use of more capital relative to labour per unit of output.
p.13
Basic Economic Problems: Scarcity, Choice, and Opportunity Cost
What is scarcity in economics?
The limited availability of resources to meet unlimited wants.
p.20
Economic Growth and Its Implications
What drives economic activities in modern society?
Human efforts directed towards the production of goods and services to satisfy needs and wants.
p.21
Types of Economic Systems: Traditional, Capitalist, Command, and Mixed
What is a key feature of traditional economies regarding production?
They produce only what they need, rarely creating a surplus.
p.10
Decision-Making Units in an Economy
How does the government primarily generate income?
From taxes levied on households and business firms.
p.12
Branches of Economics: Microeconomics and Macroeconomics
What is the distinction between microeconomics and macroeconomics?
Microeconomics focuses on individual units like households and firms, while macroeconomics looks at the economy as a whole.
p.12
Positive vs. Normative Economics
What do you understand by positive economics and normative economics?
Positive economics deals with objective analysis and facts, while normative economics involves value judgments and opinions.
p.12
Basic Economic Problems: Scarcity, Choice, and Opportunity Cost
Is air a free resource given the problem of air pollution?
No, air is not a free resource as pollution affects its quality and availability.
p.26
Basic Economic Problems: Scarcity, Choice, and Opportunity Cost
Which statement best describes the economic problem?
C. Matching endless wants with limited resources.
p.17
Basic Economic Problems: Scarcity, Choice, and Opportunity Cost
What is opportunity cost in the context of the PPF?
Opportunity cost is the sacrifice of one good to produce more of another, as shown by the PPF's downward slope.
p.21
Types of Economic Systems: Traditional, Capitalist, Command, and Mixed
How are different types of economic systems classified?
Based on the ownership of economic resources.
p.13
Types of Economic Systems: Traditional, Capitalist, Command, and Mixed
What is the profit motive in a capitalist economy?
The incentive for individuals and firms to maximize their profits.
p.23
Types of Economic Systems: Traditional, Capitalist, Command, and Mixed
What is a key feature of a command economy regarding property ownership?
Collective ownership; there is no right to private property.
p.23
Types of Economic Systems: Traditional, Capitalist, Command, and Mixed
How is resource allocation determined in a command economy?
By a controlling authority based on socio-economic goals.
p.21
Types of Economic Systems: Traditional, Capitalist, Command, and Mixed
Where are traditional economies commonly found?
In emerging markets and developing countries, often in Africa, Asia, Latin America, and the Middle East.
p.23
Types of Economic Systems: Traditional, Capitalist, Command, and Mixed
What is a characteristic of income distribution in a command economy?
Relative equality of incomes due to the absence of private property and profit motive.
p.22
Types of Economic Systems: Traditional, Capitalist, Command, and Mixed
What is a significant issue in a capitalist economy?
Inequalities in income between the rich and the poor.
p.20
Basic Economic Problems: Scarcity, Choice, and Opportunity Cost
What characterizes a labour-intensive technique?
It involves the use of more labour relative to capital per unit of output.
p.17
Production Possibilities Frontier (PPF)
Why is the shape of the PPF concave to the origin?
Because of the law of increasing opportunity cost, indicating that resources are not completely adaptable to alternative uses.
p.25
Types of Economic Systems: Traditional, Capitalist, Command, and Mixed
What are the four basic economic systems?
Traditional, capitalist, command, and mixed economies.
p.12
Decision-Making Units in an Economy
What is the basic decision-making unit of an economy?
D. All of the above (Households, Government, Business firms).
p.22
Types of Economic Systems: Traditional, Capitalist, Command, and Mixed
What is capitalism?
The oldest formal economic system where all means of production are privately owned.
p.12
Decision-Making Units in an Economy
How does the general government primarily get its income?
A. From taxes levied on households and business firms in the form of direct and indirect taxes.
p.12
Definition and Nature of Economics
Define economics from the perspective of wealth, welfare, and scarcity.
Economics can be defined as the study of how societies allocate scarce resources to maximize wealth and welfare.
p.24
Types of Economic Systems: Traditional, Capitalist, Command, and Mixed
What does economic equality entail?
Private property is allowed, but rules exist to prevent wealth concentration, ensuring equal pay for equal work regardless of race, gender, or other unrelated characteristics.
p.5
Methods of Studying Economics: Deductive and Inductive
What are the main tools used in microeconomics?
Demand and supply of particular commodities and factors.
p.11
Positive vs. Normative Economics
Which of the following is a normative statement?
A. Falling prices are good for consumers.
p.6
Methods of Studying Economics: Deductive and Inductive
What are economic theories?
Simplified pictures of reality that provide the basis for economic analysis.
p.6
Methods of Studying Economics: Deductive and Inductive
Can you provide an example of the deductive method?
If man is mortal and Abebe is a man, then Abebe is mortal.
p.24
Types of Economic Systems: Traditional, Capitalist, Command, and Mixed
Which economic system is more relevant to the Ethiopian economy today?
This requires an analysis of current economic policies and practices in Ethiopia, focusing on the balance between private and public sectors.
p.26
Basic Economic Problems: Scarcity, Choice, and Opportunity Cost
The concept of choice would become irrelevant if?
D. scarcity was eliminated.
