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Economics Chapter 1
Chapter 1: Introduction
| Question | Answer |
|---|---|
| What is the definition of economics? | The study of how people and societies use limited resources to fulfil unlimited wants, involving choices including under conditions of scarcity |
| Why is economics considered a social science? | Because it studies human behaviour, society and decision-making, similar to subjects like psychology, politics and geography |
| What is the main economic problem? | Limited resources and unlimited wants, leading to scarcity and the need for choices |
| What is scarcity? | The condition where resources are limited in supply, meaning not all needs and wants can be satisfied |
| What is choice in economics? | The act of selecting one option or another because resources are limited |
| What is opportunity cost? | The value of the next best alternative given up when making decision |
| Give an example of opportunity cost. | If you choose to study 3 hours instead of working, the income you could have earned would be the opportunity cost |
| Formula for calculating opportunity cost? | Opportunity Cost= Return of Best Foregone Option-Return of Chosen Option |
| What is microeconomics? | The study of individual markets, household and firms, focusing on prices, supply, demand and small-scale economic behaviour |
| What is macroeconomics? | The study of the entire economy, including national income, unemployment, inflation, government policies and international trade |
| Give an example of a microeconomic issue. | How much a company charges for a product or how many workers it hires |
| Give an example of a macroeconomic issue. | The unemployment rate in a country or national economic growth |
| Six ideas in the economic way of thinking? | Choice is a trade-off, cost is what you give up, benefit is what you gain, people compare of cost and benefits to choose, mos decision is 'how much' choices at the margin, choices respond to incentives |
| Who are the main economic decision-makers (agents)? | Consumer, Worker, Producer and Government |
| Why is opportunity cost important? | It ensures scarce resources are used wisely to maximize benefits and minimize regrets |
| A student goes to university for 3 years. They could have earned RM15,000 per year working, and tuition costs RM5,000 per year. What is the opportunity cost? | Opportunity Cost = (RM15,000 × 3) + (RM5,000 × 3) = RM60,000. |
| If a business chooses Project A with a 7% return over Project B with a 10% return, what is the opportunity cost? | Opportunity Cost = 10% – 7% = 3%. |
| In production, if producing 1 more unit of Good A means losing 2 units of Good B, what is the opportunity cost of Good A? | Opportunity Cost of Good A = 2 units of Good B. |
| In production, if producing 1 more unit of Good B means losing 0.5 units of Good A, what is the opportunity cost of Good B? | Opportunity Cost of Good B = 0.5 units of Good A. |
| Indonesia’s OC of making 1 fruit = 0.5 vegetables. What is the OC of making 1 vegetable in Indonesia? | 2 fruits. |
| Greece’s OC of making 1 fruit = 0.33 vegetables. What is the OC of making 1 vegetable in Greece? | 3 fruits. |
| A person skips working a part-time job that pays RM50 to watch a concert. The concert ticket costs RM100. What is the opportunity cost? | RM50 (foregone income) + RM100 (ticket) = RM150. |
| If producing 5 extra chairs means giving up 10 tables, what is the opportunity cost of 1 chair? | 2 tables. |
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