Economics - Week 1 (Introduction and the Economic Problem)

What is the Central Economic Problem?

Answer explanation

We have unlimited wants with limited resources, creating scarcity. Scarcity also implies the need to give up something to gain something else (trade-offs).

What are the objectives of microeconomics?

Answer explanation

Equity is the idea of fairness; efficiency is productive efficiency reduces the amount of cost - increases profit

What causes inflation

Answer explanation

If demand is high, a raise in prices will allow for more profit for the same product

What is a positive statement?

• Based on value

• Based on supply

• Based on trends

• Based on fact

Answer explanation

A positive statement can be right or wrong and can be tested through using facts.

What is a normative statement?

• Based on fact

• Based on statistics

• Based on value

• Based on hypothesis

Answer explanation

Normative statements are based on value - if something is good or bad; cannot be proved or disproved by referring to facts.