Principles of Economics Chapter 1

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PRINCIPLES OF ECONOMICS 3

Principlesof Economics

Chapter1

Question1

Economicsdescribes the study of how societies utilize the scarce resources inproducing valuable outputs that are distributed to differentindividuals to attend to their needs. Economics is of immenseimportance because it helps individuals in making critical decisionsin the use, allocation, and distribution of resources.

Question2

Ineconomics, there are different theories as well as models that arerelated to different economic aspects. In using these theories andmodels, economists first of all check whether the theory or the modelthat they desire to use can be associated with the issue that theywant to understand. This is usually achieved through the use dummiesso as to see whether the issue can be understood through the model orthe theory under consideration.

Question3

a.Microeconomics- this is because the issue only affects the consumer

b.Microeconomics- this is because the issue applies to market

c.Macroeconomics_ this is because the issue will affect the aggregateeconomy

d.Macroeconomics- this is because the issue will affect the entireeconomy

e.Microeconomics- this is because this is a market issue

f.Macroeconomics- this is because the issue will have impact on theentire economy

Chapter2

a.Positive Statement – This is because this is an issue that can betested so as to prove or disapprove it.

b.Normative Statement – This is because this is a subjectivestatement and cannot be tested.

c.Positive Statement – This is because the issue can be tested andeither approved or disapproved.

d.Normative Statement – This is because the issue in the statement isvalue based.

e.Positive Statement – This is because the issue being argued in thestatement can be tested for verification whether it is true or not.

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