Introduction to scarcity and the economic way of thinking

Which of the following is the best definition of an economic system?

A mechanism that decides what to make, how to make it, and who gets it. Economic systems are ways of allocating resources to production and the distribution of production created with those resources.

Which of the following would best be described as a positive statement?

Countries normally experience higher unemployment during recessions. Even though "normal" appears in this statement, it is describing an objective fact, and therefore is a positive statement.

What are the four scarce resources that any economic system must allocate between society's competing wants and needs?

Land resources, labor, capital goods, and entrepreneurship. Natural resources (land), workers (labor), technology (capital) and entrepreneurial ability are the four resources that any economic system must allocate.

Which of the following best captures the idea of the fundamental economic problem?

Limited resources and unlimited wants. The unlimited wants of human results in the problem in scarcity. which any economic system must address.

Which of the following best describes the difference between microeconomics and macroeconomics?

Microeconomics is about individuals, households, and firms; Macroeconomics is about economies as a whole. The prefix "micro" means small. Microeconomics deals with small agents. The prefix "macro" means large or big. Macroeconomics deals with the bigger picture of economy as a whole.

Which of the following is NOT a scarce economic resource?

Money. Money may be scarce, but it is not an economic resource because it is not directly used to produce.

Business profits should be redistributed through taxes to benefit more of society.

Normative statement. When you see words like should it is evidence of a normative statement, as there is usually an opinion being expressed.

Unemployment fell by 1.2% last year.

Positive statement. This is a measurable fact, not a statement of opinion. As such, it represents positive analysis.

Which of the following describes a normative statement?

Subjective and value based. While normative analysis may incorporate facts and data, ultimately there is an element of subjectivity and opinion.

Which of the following best describes what we mean by resources in economics?

The factors used to produce goods and services. The four economic resources-land, labor, capital, and entrepreneurship- are used to produce goods and services.

What is the best definition of economics?

The study of how society's scarce resources are allocated. The fundamental question of economics is how societies deal with the problem of scarcity.

Which of the following are characteristics of a scarce resource?

There is a demand for that resource with limited supply. A resource for which there is demand will be scarce if it is also limited in supply.

What does it mean to say a resource is scarce?

There is not enough of this resource to satisfy all the wants and needs of a society. Scarcity refers to the conflict that arises from competition over a society's limited resources.

Which of the following is an example of a macroeconomic question?

What would be the likely impact of an increase in business taxes on the overall level of inflation in the country? This is a macroeconomic question because it deals with the the impact on the overall price level in the country as a whole.