Economics and the Economy

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What is Economics?

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The study of how economists think about choices.

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What do economists assume about people's behavior when making choices?

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They behave rationally.

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What is the concept of 'Choosing at the margin'?

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It involves considering the marginal benefit and marginal cost of an additional unit of activity.

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What is the Production Possibility Frontier?

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It illustrates the maximum feasible amount of two goods that can be produced with available resources.

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What are the three types of economies?

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Command economy, Free market economy, Mixed economy.

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What is a Command Economy?

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An economy where the government gives detailed instructions.

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What is a Free Market Economy?

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An economy where the government does not influence market decisions.

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What is a Mixed Economy?

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An economy where the government and private sector solve economic problems together.

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What is the difference between Positive and Normative economics?

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Positive economics studies objective explanations of how the economy works, while Normative economics offers recommendations based on personal value judgments.

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What is Microeconomics?

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The study of how individuals and firms make economic decisions.