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    Questions (also attached):

    1) What is economics?
    2) What types of things are considered in economics? What is not?
    3) What role does economics play in your personal decisions?
    4) What are the advantages of a market versus a command economy?

    1. What is the difference between the shift of and a movement along the demand curve?
    2. What is the difference between the shift of and a movement along the supply curve?
    3. How do shortages and surpluses develop?
    4. What types of shortages and surpluses affect you either personally or in your work environment?

    2. Answer the following questions:
    a. What causes the changes in supply and demand?
    b. How do shifts in supply and demand affect your decision making?
    c. List four key points in the study of economics.

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    Solution Preview

    Use has been made of material at these sites in answering the questions*:
    www.econ.brown.edu/fac/Louis_Putterman/ courses/ec151/Chapter_05.pdf
    www.investopedia.com/university/ economics/economics3.asp

    1) What is economics?

    Economics is the science that studies how people and societies make decisions that allow them to get the most out of their limited resources.
    Economics is the study of making choices. We as individuals and as a society experience scarcity (of raw materials, of goods and services, of time, and so on) in relationship to our ever-growing needs and wants.
    Various definitions of economics exist. Some are reproduced below:
    Marshall defined economics as
    "a study of mankind in the ordinary business of life; it examines that part of individual and social action which is most closely connected with the attainment and with the use of the material requisites of wellbeing. Thus it is on one side a study of wealth; and on the other, and more important side, a part of the study of man."
    (At the turn of the twentieth century, Alfred Marshall's Principles of Economics was the most influential textbook in economics.)
    Adam Smith (1723-1790) is generally held to be the founder of modern Economics. Smith saw economics as:
    '...an inquiry into the nature and causes of the wealth of nations.'
    (From A. Smith, An Enquiry into the Nature and Causes of the Wealth of Nations, 1776.)
    In the nineteenth century John Stuart Mill (1806 -73) described economics as,
    '...the practical science of the production and distribution of wealth'. (From J. S. Mill, The Principles of Political Economy, 1848.)
    The standard definition according to most textbooks is something like this:
    "Economics is the social science which examines how people choose to use limited or scarce resources in attempting to satisfy their unlimited wants."

    2) What types of things are considered in economics? What is not?

    Economics is the study of how people choose to allocate scarce resources to satisfy their unlimited wants. Economics considers how choices are made in the presence of scarcity. These choices are what to produce, how to produce and for whom to produce.
    Economics studies the theories used to explain the behavior of consumers and firms, and also the operation of markets (such as the market for gold, or Microsoft shares). At the macro-economic level, Economics studies how the whole economy works. What causes unemployment? How can it be cured? Should we protect our industries against foreign competition? Should Britain join the Euro system and abandon the £?

    Economics studies humans. It does not inquire into either the functioning of non-human environment, or non-human values associated with it. Economics does not study the origin of human 'ends' or 'wants'. Economics is meaningless if means (resources) are not scarce. Economics does not study the source of tastes or preferences --they are given. This means that one's taste for cars as opposed to one's taste for serving others is inexplicable, simply a datum. Economics does not attempt to decide whether our choice of ends to pursue is wise. It does not tell us that we are wrong if we value a certain amount of leisure more than some amount of money. It does not view humans as being only worried about monetary gain. There is nothing "noneconomical" about someone giving away a fortune, or turning down a high-paying job to become a monk.

    3) What role does economics play in your personal decisions?

    Economics examines how we make choices: a new car or college tuition? more hospitals or more highways? more free time or more income from work? It gives us a way of understanding how to make best use of natural resources, machinery, and people's work efforts.
    Economics helps us examine trade-offs between various goals and anticipate the outcomes of changes in governmental policies, company practices, or composition of the population, and so on. Almost all issues of public and private policy involve economics and so do our own individual choices.

    4) What are the advantages of a market versus a command economy?
    A command economy is an economy that is planned and controlled by a central administration, as in the former Soviet Union.
    Advantages of a market versus a command economy:
    1. better provision of incentives : The profit motive in market economy is the most reliable way to increase output, cut costs, innovate, and meet unmet wants. In contrast in command economies, public-mindedness is an insufficient incentive, so promotions and raises are offered to managers who meet the goals of government planning; although these might help managers achieve quantitative goals, they do not encourage them to cut costs, innovate, and meet unmet needs.
    2. Market economy better uses local information and conveys global information more cheaply (in prices): In a market economy, local decision makers use their information without having to convey it up a decision hierarchy; the global information they need is transmitted to them through the price system; prices are an automatic byproduct of exchanges in markets. The information does not have travel to a central bureau in a market economy unlike in command economy.

    In ...

    Solution Summary

    Short answer questions in economics on the topics of economics, market economy, command economy,supply and demand etc.