Economic Thinking

QUESTIONS ANSWERS

1. What is scarcity? It is the fact that there is a limited amount of resources to satisfy
unlimited wants.

2. What are productive Things that are inputs to production of goods and services to make
resources? a profit. There are four productive resources: land, labor, capital,
and entrepreneurship.
3. What is opportunity
An economics term that refers to the value of what you have to give
cost?
up in order to choose something else.

Trade and market exist because it allow people to buy what they
4. Why do trade and
need to consume and sell the goods and services they produce.
markets exist?
Trade and market helps in the development of the economy and
makes a nation wealthy.

Microeconomics is the study of individuals, households and firms'

behavior in decision making and allocation of resources. It
generally applies to markets of goods and services and deals with
5. What is the difference
individual and economic issues. On the other hand,
between macroeconomic
Macroeconomics is the study of the behavior and performance of
s and microeconomics?
an economy as a whole. It focuses on the aggregate changes in the
economy such as unemployment, growth rate, gross domestic
product and inflation. It analyzes all aggregate indicators and the
microeconomic factors that influence the economy.

The purpose of Economic Model is to take a complex, real-world

6. Why economic situation and pare it down to the essentials. If designed well, a
models are useful to model can give the economist a better understanding of the
economists? situation and any related problems.
Economists use models as the primary tool for explaining or making
predictions about economic issues and problems.

Just remember the word PEMDAS. It stands for Parentheses,

Exponents, Multiplication, Division, Addition and Subtraction. The
proper order of operation goes this way:
1. Simplify all of the parentheses. This includes all forms of
7. What proper order of grouping symbols, such as brackets and braces.
operations is used while 2. Simplify all exponents.
solving simple equations 3. Simplify all multiplication and division from left to right.
with variables?
When simplifying the multiplication and division, work from
left to right.
4. Simplify all addition and subtraction from left to right.
When simplifying the addition and subtraction, work from left
to right.
8. How does a graph
shows the relationship
It is simply to show how much one variable is affected by another.
between two variables?

A positive relationship, indicates that the values change in the

9. How do you same direction; high values on one variable are associated with
differentiate between a high values, and conversely, low values on one are associated with
positive relationship and low values on the other. On the other hand, a negative relationship
a negative relationship? implies that the values change in the opposite direction; high values
on one variable are associated with low values on the other

10. What are the types of The four most common graphs are: Bar Graph, Line Graph, Pie
graphs? Graph and Cartesian Graph.