Question

1. Explain the concept of economics.

2. Distinguish between microeconomics and macroeconomics.

3. Explain the difference between positive and normative statements.

4. Describe the economic way of thinking.

5. Examine opportunity costs and the trade-offs in economics that people face.

6. Discuss factors influencing demand and supply.

7. Elaborate on market equilibrium.

8. Define economics.

9. Explain the concepts of scarcity and opportunity cost and how they relate to the definition of economics.

10. Explain the distinguishing characteristics of the economic way of thinking.

11. Distinguish between microeconomics and macroeconomics.

12. Define the three factors of production: labour, capital and natural resources.

13. Explain the role of technology and entrepreneurs in the utilisation of the economy’s factors of production.

14. Explain what determines the demand for a particular good and service.

15. Explain what determines the supply of a particular good and service.

Answer 1

1. Economics is the science of optimally utilising scarce resources. Humans have unlimited wants and desires but there are only a limited amount of resources available which also have alternate uses. Economics also delas with the production, consumption and transfer of wealth.

2. The two main branches of economics are microeconomics and macroeconomics. Microeconomics deals with the study of choices made by individual units or business firms in an economy. Like consumer behaviour, producer behaviour, theory of firms, market structure, etc.

When the study choices are of all individuals units or business firms together, it is called as macroeconomy. Its the study of micro units at macro level or economy level.

3. Positive economics makes an analysis of an economic situation that describes how things are, using the given facts. It is objective based. Statements could be tested, it could be proved or disproved.

Normative economics makes an analysis that focuses on how thingsd ought to be. It is subjective and value based. Statements cannot be tested as they are opinion based.

4. Its a logical way of organizing thoughts and understanding the concepts of economics. The following four are the key ideas of economic way of thinking:

1. choice of trade-off which is also known as opportunity cost.

2. Individuals compare benefits and cost in order to make a rational choice. Benefit is what one gains and cost is what one needs to give away.

3. Choices are made at the marginal, known as marginalism.

4. choices respond to incentives.