‫‪Chapter 1‬‬

‫‪Prepared by : Shayma Al Balushi‬‬

‫"يقولون الطمع شين لكن بموضوع الدرجات الطمع زين☺"‬
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What is economic?
Social science + studies people choices + that they make because of
Scarcity.
Economic problem?
Unlimited wants/needs
Scarcity
Limited resources
Factors of production ?
1) Land : all the natural resources
2) Labor: time and effort that spend to make goods
Human : skills + knowledge
3) Capital:
Physical : machine + building
4) Entrepreneurship : manager who controls Land + Labor + capital
The return of each production factor(Economic resources) ?
1)Land rent
2)Labor wages/salary
3)Capital interest
4)Entrepreneurship profit
Types of Economy :
Type of economy who decide to use the resources

Centrally planned economy Government

Market economy Household and firms interacting

Mixed economy buyers and sellers+ government

Study what example

Microeconomic How household + - Demand for LG TVs

firms make choices - Increase prices in
and interact healthcare sector
Macroeconomic Economy as a whole - Inflation
- Unemployment
- Economic growth
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The big economic questions:
Question example
what What to produce ? Car/furniture/cloths

How How to produce ? Technology / workers / machines

who For who ? Women /men /kids

statement Q Can be Example

tested
Positive What is 5% decrease in salaries lead to 10%
yes decrease in demand

Normative What should Salaries should not decrease more than

No 10%

Marginal Definition rule

cost opportunity cost of producing MC > MB = decrease

one more unit of good production
benefit benefit received from MB > MC = increase
consuming one more unit of production
good.

PPF is A graph that shows the max. amount of the two goods
that can be produced by using limited resources

PPF

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 PPF Indicate the possibility(possibilities)showing:
1) Underutilization of resources …………….
2) Efficient in production …………………..…
3) Unattainable …………………………............
4) Inefficient in production ……………………
5) Fully utilized recourses ………………………

Trade off ?
Producing more of one good Producing less of other good
Opportunity cost ?
The value that sacrificed in choosing one activity over the other.
Choice car Cycle Opp. cost?
A 0 15
B 1 14
C 2 12
D 3 9
E 4 5
f 5 0
1) What is the opp.cost if we increase production of cars from 3 to 4?

2) What is the opp.cost if we increase production of cars from 2 to 5?

3) What is the opp.cost if we increase production of cycle from 14 to 15?

4) What is the opp.cost if we increase production of cycle from 5 to 14?

5) Using the available resources do you think its possible to produce 3 cars
and 9 cycles ?

6) Using the available resources do you think its possible to produce 4 cars
and 3 cycles ?

7) Using the available resources do you think its possible to produce 2 cars
and 20 cycles ? 4
possibility x y
A 0 0

B 1 87 Give ( - )
Opp = XQ
C 2 80
Get ( + )
D 3 65

E 4 45

F 5 20

G 6 0

1) What is the opp. Cost if we increase production of X from 3

to 4?

2) What is the opp.cost if we increase production of Y from 20

to 80?

3) Using the available resources do you think it is possible to

produce 3 X with 62 Y?

4) Using the available resources do you think it is possible to

produce 50 Y with 4 X?

5) Draw the general form of PPF . Then show the effect of an

economic growth in the sector of X and Y ?

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1- The following are considered factors of production:
A( Capital, land , labors
B( Capital, land , labors, money
C (Labors, land , capital, entrepreneurship
D (Labors, land , capital, wages

2- The statement ʺAn increase in the price of gasoline will decrease

the amount purchasedʺ is
A) a political statement.
B) a positive statement.
C) a normative statement.
D) a scientific statement.

3- What is the fundamental difference between Macroeconomics

and Microeconomics?
A) Macroeconomics concentrates on those parts of the economy
involving very large amounts of money, while microeconomics
concentrates on those parts of the economy involving small sums of
money.
B ) Macroeconomics studies the behaviour of large firms, while
microeconomics studies the behaviour of small firms.
C( Macroeconomics involves studying the economy as a whole, while
microeconomics involves studying the behaviour of individual
industries, firms, and households
D( There is no difference; macroeconomics and microeconomics are
the same.
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4- Macroeconomics differs from microeconomics in that
macroeconomics
A) includes second round effects while microeconomics does not.
B) analyses marginal as well as average benefits and costs.
C) studies the national economy while microeconomics analyses the
decisions of individual people and firms.
D) emphasizes relative prices instead of price indices.
5- When an economy produces more houses and fewer typewriters, it
is answering the ________ part of one of the two big economic
questions.
A) ʺwhatʺ
B) ʺhowʺ
C) ʺwhereʺ
D) ʺfor whomʺ
7- When China builds a dam using few machines and a great deal of
labor, it is answering the ________ part of one of the two big
economic questions
A) ʺfor whomʺ
B) ʺwhenʺ
C) ʺwhereʺ
D) ʺhowʺ
8- If the marginal benefit(MB) of good (X) > the marginal cost (MC) of
good (X) then:
A (It is better to produce or consume more of good (X)
B( It is better to produce or consume less of good (X)
C (It is better to produce or consume more of good(Y)
D( It the allocative efficiency 7