Introduction to Economics and Macroeconomics
1 Explain why both nations with high living standards and nations with low living standards face the problem of scarcity. If you won $1 million in a lottery, would you escape the scarcity problem? You would not escape the scarcity problem even if you won $1 million in a lottery because the problem of scarcity will always be present. There will always be unlimited wants that cannot be satisfied due to limited resources.
2 Why is money not considered as “capital” in economics? Money is not a productive resource. It is used for purchasing resources. Capital in economics can actually be used to produce goods and services.
3 Explain the difference between macroeconomics and microeconomics. Give example of the areas of concern to each branch of economics. Micro: individual unit. Eg household, market, industry
Macro: economic behavior of aggregate (national level) Eg national output, unemployment rates, etc. page 6
4 Explain why it is important for an economic model to be an abstraction from the real world. TO UNDERSTAND THE COMPLEXITIES OF THE REAL WORLD.
5 Explain the importance of the ceteris paribus assumption for an economic model. Ceteris paribus = all other things being held constant/equal. Using the ceteris paribus you will then be able to rule out certain changes in the variables.
6Explain the statement “There is no such thing as a free lunch” in relation to scarce resources. (Explains opportunity cost) the statement actually demonstrates OC. OC is the next best alternative sacrificed for a chosen alternative. 7We can easily commit errors in reasoning as most economic events appear to have many possible simultaneous causes. Hence it is difficult in economics to unscramble cause and effect.
(i) Explain what is the “post hoc, ergo propter hoc” fallacy.
(ii)Furnish an example in the field of economics to enhance...