1) Explain the terms scarcity and opportunity cost.
The term scarcity means that people's wants and needs for products and services outnumber the available
supply. Because resources are limited, supply is limited, but demand is limitless. While, opportunity cost refers to the
highest valued alternative that must be sacrificed when choosing an option and because you do one thing you’ve lost
the opportunity to do something else.
2) What does the concept ceteris paribus mean?
The concept in economics to describe the other factors not changing is called ceteris paribus which means
everything else remains constant and only one variable changes. For example, when something becomes expensive
people do not want to buy more of it, the thing is there is a ceteris paribus in this assumption because maybe the price
increased but the income of consumers have increased as well then the demand will be the same.
3) List and describe the productive resources of an economy, give examples.
There are three productive resources, first is the human resources these are the people that doing jobs such as
workers and entrepreneurs, next is the capital resources which are broken down into two categories first is the human
capital on which we are improving our skills like training while the other one is physical capital which talks about tools and
equipment like technologies. Lastly, natural resources which is anything comes from nature that is non-man-made such
as land and animals.
4) Explain the production possibility frontier, give an example.
A production possibility frontier reflects the possible outputs of two distinct products or services when all resources
required for their production are properly allocated. For example, a single economy that produces only two goods which
are widgets and gadgets but they have a limited quantity of resources, if all resources are used to produce gadgets they
can produce 12 but 12 gadgets means no widgets.
5) What are the three basic economic questions?
The three basic economic questions that every society has to answer are, what to produce? how to produce? and
for whom to produce?. The society has to decide what they should produce, then figuring out how they should produce,
after knowing these two they have to decide for whom they are producing.
6) Explain the meaning of and the difference between microeconomics and macroeconomics.
The ultimate goal of microeconomics as a study is to try the best to understand how individuals and organizations
prioritize the things they want, one of the example is the study of supply and demand. While, macroeconomics is the study
of the entire economy it examines the effect of unemployment, interest rates, inflation and economic growth.
7) Describe the roles and functions of firms (business entities) in the economy.
Based on the article I’ve read, the main function of firms is to offer goods and services. Firms play an important
role to an economy's circular flow of income because they employ workers to manufacture goods and services, develop
new products, and invest in capital and new technology, and providing goods and services for consumer.
8) Explain the main role of households in the economy.
Households are taking economic decisions jointly and maximize satisfaction with limited factors. Households
play a key role in the economy by consuming products and services from product markets while also supplying labor,
capital, land, and entrepreneurial potential to resource markets.
9) Explain the functions of the government and government institutions in the economy.
The government function in the economy is providing public goods, these are things that we all use and we all
benefit from equally which improve our society. While government institutions are promoting general welfare by
redistributing some wealth from the wealthiest to the poorest and to provide this, several government programs exist.
10) How can knowledge in managerial economics be important in business?
The goal of any business or industrial enterprise is to make the most money possible. A good decision requires
a full knowledge in areas of economic theory and methods of economic analysis, and managerial economics deals with
these aspects and tools of analysis, therefore it is relevant to the decision-making process.