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Short answer questions in economics

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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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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.

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Solution Summary

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

Similar Posting

Economics question book the economy today schiller 10/e

Section 1: Graphical Analysis:
For each question (numbers 1 through 14), choose an answer from the choices (A through E) below:
A) The curve shifts to the right (outward)
B) The curve shifts to the left (inward)
C) Movement along the curve
D) The market outcome is not on the curve
E) No impact

For Questions 1 through 5, characterize how the impact of each of the following events would be represented on the U.S. Production Possibility Frontier curve (Select answer from A through E above):
1) Improved information flows
2) High unemployment
3) An increase in workforce size
4) The aging of public infrastructure
5) The movement of U.S. corporate capital overseas

For Questions 6 to 11, characterize how the impact of each of the following events would be represented on the current U.S. demand curve for coffee (Select answer from A thru E above):
6) An increase in the price of tea
7) An increase in the price of coffee
8) The public expects an increase in the price of coffee.
9) Growing public concern over the health effects of caffeine
10) A decrease in price of sugar
11) Hurricane landfall in a major coffee production area

For Questions 12 through 14, characterize how the impact of each of the following events would be represented on the supply curve for coffee in the U.S. market (Select answer from A through E above):
12) Growing public concern over the health effects of caffeine
13) Hurricane landfall in a major coffee production area
14) The introduction of a new chemical that controls an insect pest affecting coffee

Section 2: Definitions & Short Answers:

1) Explain why we face economic choices.
2) What does the PPF curve represent? What does outward movement of the PPF curve represent? Is it possible to have a level of consumption that exceeds the level of production represented by the PPF? If so, how?
3) Define marginal cost.
4) Define opportunity cost.
5) Explain what inflation is and how it is calculated?
6) Define ceteris paribus and explain its significance to economic analysis.
7) Describe and discuss the circular flow of money leave government and foreign trade out of the picture).
8) Define Gross Domestic Product (GDP) and discuss what is and is not included with the calculation of GDP.
9) Discuss the difference between nominal and real GDP? If a news report mentions GDP without any adjective, it is most probably referring to which: nominal or real?
10) Discuss the major categories of economic resources (inputs to production).
11) Explain why the U.S. Congress choose 3% inflation rather than zero inflation as the benchmark for price stability.
12) List and discuss some of the reasons that the U.S. government has committed itself to avoiding significant inflationary effects (in other words, discuss some of the negative effects of inflation).

Section 3: short Essays

1) Discuss frictional, structural and cyclical unemployment. Which type do we expect that we may be able to eliminate via effective government policy.

2) Explain the "process" by which the forces of supply and demand interact to "clear the market".

3) Define the law of demand. List and discuss the determinants (shift factors) for demand.

4) What are the three principle circumstances in which government intervention in a market would be justified in order to enhance market efficiency? Define and provide an example of each major category.

5) Every economy must answer three questions that are basic to production. List and discuss these questions/issues. Be sure to relate the questions to the issues of efficiency and equity.

6) List the four (4) quantities that comprise the "expenditures" approach to measuring GDP. Discuss the makeup of each of these components.

Section 4

1) Describe the relationship between "excessive" demand and inflation.

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