Chapter 1

Question 1

What are the 4 main types of wants?

Answer 1

1) physical
2) social
3) wants to improve social status
4) wants to improve quality of life

Question 2

What are the 4 elements of the unending cycle of economic activity?

Answer 2

1) efforts
2) scarce means
3) Satisfaction
4) Ends

Question 3

What does “scarcity” mean or “scarce economic resources”

Answer 3

Scarcity is relative to society’s needs for a resource

Scarcity does not mean rarity, economic resources may be scarce but not rare

Scarce economic resource
1) Land
2) Labour
3) Capital
4) organization

Question 4

What are “Factor resources” and what are the 4 main kinds that are services sold?

Answer 4

When households sell their services in the factor market

1) wages
2) rent
3) interest
4) profits

Question 6

What is a “household” in economics?

Question 7

What is opportunity cost?

Answer 7

When something has to be given up to receive something else or more of something else

Sacrificing the next best option for something

Question 8

What is economic law?

Answer 8

Statements of human tendencies related to the satisfaction of unlimited wants by using means which have alternative uses

Question 9

What are the 6 steps for creating economic laws?

Answer 9

1) Selection of a hypothesis
2) selection and definition of economic variables
3) classification of economic variables
4) establish relationship between selected variables
5) application of the law to make predictions
6) Testing predictions

Question 10

What is a hypothesis?

Answer 10

A universally acceptable statement about human behaviour

Question 11

Is economics a normative science?

Answer 11

No

Question 12

What is a normative statement?

Answer 12

Moral platitudes or value judgements with emphasis on words like “ought”, “must”, “should”

Not a scientific statement or numerically/statistically backed statement

Question 13

What are positive statements?

Answer 13

A statement that can be verified with strong evidence for accepting it

A statement of what actually is as opposed to what ought to be

Question 14

What are the 2 main types of graphs in economics?

Answer 14

1) linear
- straight line with a constant slope
2) Non-linear
- curved line with different slopes

Question 15

What is a linear demand equation and What are the 4 components it?

Answer 15

P = Constant - Slope(Independent variable)
P = Y intercept - Slope(X)

1) The price
- Solving for the price, also known as P
2) The parametric constant
- The constant is the Y axis intercept
3) the negative slope
- The slope is Rise/run
4) The independent variable
- The independent variable is the letter variable of the X axis

Question 16

What is the ordered pair rule and how do you do it?

Answer 16

When you have 2 prices and 2 quantities and you use them to find the slope

Variables being used:
P1 Q1
P2 Q2

Note: Change in P is the vertical change, change in Q is the horizontal change

step 1) Find the change in P by subtracting P1 from P2
Change in P = P2-P1

Step 2) Find the change in Q by subtracting Q1 from Q2
change in Q = Q2-Q1

Step 3) Calculate the slope by dividing the change in P by the change in Q
Change in P/Change in Q

Question 17

What does a demand curve with a zero slope look like?

Answer 17

A straight horizontal line

Question 18

With does a demand curve with an infinite slope look like?

Answer 18

A straight vertical line

Question 19

What shapes can a non-linear graph be and what kind of slope do they have?

Answer 19

Concave or convex from the origin

Concave = increasing slope
Convex = decreasing slope