Quiz 1 - INTRODUCTION

1. Define economics
• Economic is about the wants and means of humans. The basis of economics is
the human beings have unlimited wants with the world of limited means. As a
study that shows how the society’s resources are shared, economics also
describes and analyzes choices about how the goods and services are being
produced, disseminated and consumed by the users and evaluates the
consequences of those choices. Economics is concerned with the efficiency of the
production and services to be more open with the improvement of the maximization
of the resources.

2. Define scarcity
• Scarcity is a basic economic problem that deals with the gap between limited
resources and limited wants of the consumers. When scarcity happens, people
make decisions about how to efficiently allocate resources, in order to satisfy the
basic needs of an individual. Natural resources can become scarce if consumer
demands for more previously unwanted resources because of changing
preferences or for different uses.

3. What is ceteris paribus

• Ceteris Paribus assumes that “all other things equal or constant.” It acts as a
shorthand indication of the effect of one economic variable to another, provided
that other variables remain the same. Economist rely on ceteris paribus to describe
relative tendencies in markets and build and test economic models.

4. What are the three considerations of an economic perspective? Explain each

• Scarcity and Choice
o Scarcity requires choice. People choose which of their desires will they
satisfy and which will they leave unsatisfied. When there is scarcity and
choice, there is cost. Opportunity cost represent the individual or business
misses out on when choosing one alternative over another.
• Purposeful Behavior
o Rational self-interest entails making decisions to achieve maximum utility,
individuals weigh the costs and benefits of a certain product or service
before availing. Utility is the pleasure or satisfaction of an individual
obtained from consuming a good or service.
• Marginalism: Benefits and Costs
o Marginal analysis weighs the marginal benefits against the marginal cost.
The marginal cost of an action should not exceed its marginal benefits.

5. Compare and contrast microeconomics and macroeconomics

• Microeconomics focuses on how individual consumers and firms make decision.
These individuals can be a single person, a household, a business/organization or
a government agency. On the other hand, Macroeconomics studies an overall
economy on both a national and international level. Its focus can include a distinct
geographical region, a country, a continent, or even the whole world, which
includes the foreign trades, unemployment rates, and the level of inflation and
interest rates. Although microeconomics and macroeconomics are different
principles, macroeconomics still depends on level of production and consumption
made by the households and individual’s more-informed decision when allocating
resources.