Basic Economic Concepts Economics and Scarcity Goals Identify
Basic Economic Concepts Economics and Scarcity
Goals • Identify the difference between macro and microeconomic studies and examples of each. • Identify examples of positive and negative economics. • Define scarcity and shortages and provide examples.
I. What is Economics? Economics: • The study of how people and society pursue satisfying their needs and wants. Macroeconomics • Economics on a larger scale. • Ex. Trade, Government policy, and economic systems Microeconomics • Economics on a smaller scale. • Ex. Businesses, specific markets, competition
I. What is Economics? Positive Economics Normative Economics • Analysis used to answer questions about the way the world works. • Statements of “what is” or “what will be. ” • No value judgements are applied • Analysis that involves saying how the world should work. • Statements of “what should be. ” • Judgements of what is “right, ” “wrong, ” or “best. ”
II. Scarcity: • Means “of limited amount. ” • Everything is scarce. • No resource is limitless. Shortage: • Anytime the amount demanded exceeds the amount supplied. • Shortages are temporary, scarcity is always there.
1. • Economics is best described as a) The study of how scarce material wants are allocated between unlimited resources. b) The study of how scarce labor can be replaced by unlimited capital. c) The study of how decision makes choose the best way to satisfy their unlimited material wants with a scarce supply of resources. d) The study of how unlimited material wants can best be satisfied by allocating limitless amounts of productive resources. e) The study of how capitalism is superior to any other economic system.
2. • Which of the following statements correctly describes the economic concept of scarcity? I. Scarcity means that a society has limited resources. II. Scarcity would not exist in societies that engage in trade. III. Scarcity exists when society has to make a decision regarding how to allocate its resources. a) b) c) d) e) I only III only I, II, and III I and III only
3. • Which of the following statements is positive? a) An economy that produces more butter than guns is better off than an economy that produces more guns than butter. b) Nations should concentrate their resources on producing wholesome consumer goods as opposed to the weapons of war. c) The production possibilities frontier is concave to the origin because of the law of increasing costs. d) Nations ought to devote at least some of their resources to national defense. e) Nations would do better by producing toward the middle of their production possibilities frontiers as opposed to the extreme points near the axes.
4. • The primary focus of microeconomics is a) b) c) d) e) Families and how they make money. Firms and how they make profits. Individual units within the overall economy. Government. Small countries.
5. • The fundamental problem in economics is that resources are limited; yet needs, wants, and desires are unlimited. This is summed up by the concept of a) b) c) d) e) Money. Power. Greed. Scarcity. Investment.
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