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C h a p t e r

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WHAT IS ECONOMICS?

Answers to the Review Quiz

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1. List some examples of scarcity in Australia today.

An example of scarcity at the economy-wide level would be people with lower incomes being forced to choose between food and petrol due to high prices for both. An example of scarcity at an individual level would be a person unable to afford both life-saving (or life-enhancing) medicine and food. At a more student-oriented level, examples of scarcity include not enough income to afford both tuition and a nice car, and not enough learning capacity to study for both an Economics exam and a Chemistry exam in one night.

2.

Use the headlines in today’s news to provide some examples of scarcity around the world.

A headline in National Post in July 2008 was “Last-Frontier Forest is at Risk from Boom.” This story discusses how the “global resource boom is threatening one of the world’s last tropical-forest frontiers: the Merauke region of Indonesia …”. The story points out the scarcity of tropical rainforests as well as the scarcity of mineral reserves and how the two are colliding.

3.

Use today’s news to illustrate the distinction between microeconomics and macroeconomics.

Microeconomics: Examples of today’s news that illustrate microeconomic issues are: How will a rise in food prices change what people buy? What will happen to the number of students attending university if HECS fees were to increase? What will happen to employment of low-skilled workers if the minimum wage is increased? Macroeconomics: Examples of today’s news that illustrate macroeconomic issues are: How will the Australian government’s stimulus package influence the national debt? What would happen to total output in the economy if income tax rates were increased or reduced?

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1. Describe the broad facts about what, how, and for whom goods and services are produced.

What gets produced is significantly different today than in the past. Today the...