Introduction to Economics Exercise 1
INTRODUCTION TO ECONOMICS
Exercise 1
1. What determines that a resource be scarce? Why is scarcity important in defining Economics as a science
Resources are seen as being scarce, when the wants exceed the resources. The fundamental problem of economics relates to the choices made in the face of limited resources and unlimited wants.
2. Read your local newspaper and economic magazines. Explain the difference between Microeconomics and Macroeconomics. From your research, give three examples of microeconomic and macroeconomic issues.
Microeconomics relates to the study of households and firms and the interaction between these different economic actors. Macroeconomics, however, relates to the study of the economy as a whole, and in particular problems pertaining to growth, unemployment and inflation.
Examples of microeconomic issues:
1. price ceilings/floors 2. positive/negative externalities 3. elasticity
Examples of macroeconomic issues:
1. inflation 2. unemployment 3. economic growth (GDP)
3. Regarding the concept of Opportunity Cost, comment how your opportunity cost of going to the movies may be affected when: a. You have a final exam the following day b. The University will be shut down for a month starting today c. The same movie will be shown on TV tomorrow
a) increase
b) decrease
c) increase
4. Explain if the following statements are true or false, Explain your reply d. The opportunity cost of choosing a certain activity is equal to the sum of all the benefits of all the alternatives not chosen. e. Opportunity cost is a subjective measure
a) False - the opportunity cost of choosing a certain activity is equal to the cost of the next best alternative forgone.
b) True – opportunity cost relates to the individual, in that they must choose how to maximize their own utility/happiness, and opportunity cost can vary from individual to individual.
5. Under what conditions is it
Exercise 1
1. What determines that a resource be scarce? Why is scarcity important in defining Economics as a science
Resources are seen as being scarce, when the wants exceed the resources. The fundamental problem of economics relates to the choices made in the face of limited resources and unlimited wants.
2. Read your local newspaper and economic magazines. Explain the difference between Microeconomics and Macroeconomics. From your research, give three examples of microeconomic and macroeconomic issues.
Microeconomics relates to the study of households and firms and the interaction between these different economic actors. Macroeconomics, however, relates to the study of the economy as a whole, and in particular problems pertaining to growth, unemployment and inflation.
Examples of microeconomic issues:
1. price ceilings/floors 2. positive/negative externalities 3. elasticity
Examples of macroeconomic issues:
1. inflation 2. unemployment 3. economic growth (GDP)
3. Regarding the concept of Opportunity Cost, comment how your opportunity cost of going to the movies may be affected when: a. You have a final exam the following day b. The University will be shut down for a month starting today c. The same movie will be shown on TV tomorrow
a) increase
b) decrease
c) increase
4. Explain if the following statements are true or false, Explain your reply d. The opportunity cost of choosing a certain activity is equal to the sum of all the benefits of all the alternatives not chosen. e. Opportunity cost is a subjective measure
a) False - the opportunity cost of choosing a certain activity is equal to the cost of the next best alternative forgone.
b) True – opportunity cost relates to the individual, in that they must choose how to maximize their own utility/happiness, and opportunity cost can vary from individual to individual.
5. Under what conditions is it