ECONOMICS REVIEW QUESTIONS
By Yoftahe H
In Addis Ababa University
Unit one review questions
1. Define economics from perspective of wealth, welfare, scarcity and growth. Which
definition more suits for economics? Why?
Wealth perspective
• Economics is accumulation of valuable economic resource by producing
goods and services to generate income.
Welfare Perspective
• Economics studies about efficient allocation of scarce resources to satisfy
unlimited human want and studies about income distribution and how this
affects social welfare.
Scarcity Perspective
• Economics studies about how people ese limited resources efficiently to
satisfy unlimited human want.
Growth perspective
• Economics studies about how people use scarce resources efficiently and
increase the production of goods and services of the economy.
✓ More suit for Economics is scarcity, because Economics study, about efficient
allocation of scarce resource to attain maximum unlimited human wants.
2. Why we study economics? Have you gained anything from this chapter? Would you
discuss them please?
• We study economics to know how to manage and efficiently allocate our
scarce resources to get the maximum satisfaction of our unlimited want.
3. Define scarcity, choice and opportunity cost. Can you link them in your day to day
lives?
• Scarcity: is the limitation of resources to satisfy unlimited human want.
• Choice: is an alternative (option) we choose because of scarcity or limitation
of resource.
• Opportunity cost: is the next best alternative that is scarified or forgone to
obtain one more unit of a product.
4. What do you understand by positive economics and normative economics?
• Positive Economics: is concerned is analysis of facts and attempts to
describe the world as it is out any value judgement or it gives scientific
explanation is out any value judgment.
, • Normative Economics: is a matter of opinion or it is subjective in nature
which cannot be proved or rejected with reference to facts. It is leaded with
judgments about what is good or what is bad.
5. Explain why economics deals with allocation and efficient utilization of scarce
resources only?
• Economics deals is allocation and efficient utilization of scarce resources
because it tries to satisfy the unlimited human want is limited resource.
6. In recent years, especially around big cities, there is the problem of air pollution and
the likelihood of poisoning is high. Given this scenario, do you think that air is free
recourse? Justify your answer.
• Air is a free resource because we are not paying any price to breath it.
According to the given scenario there is air population which is the negative
externality of a business organization so there may be a health problem
therefore we are not paying for the air but we may pay for the treatment.
7. Describe the four categories of economic resources. Which category of resources
you and your family owned?
• There are four categories of economic resources: -
A. Land: - a free gift of nature.
B. Labour: - physical and mental effort of human beings.
C. Capital: - all manufactured inputs that can be used to produce another
goods and services.
D. Entrepreneurship: - special type of human talent that helps to organize
and manage other factor of production.
• From the above categories of economic resources, me and my family own
land, labour, and capital.
8. What is a production possibility curve?
• Production possibility curve (PPC) shows the various possible combinations
of goods and services that can be produced in given resource and technology.
9. Discuss the economic system in Ethiopia over the recent three regimes (EPRDF,
Derg and imperial regime)
• Economic system of Ethiopia in EPRDF regime
✓ Ethiopia recently follows mixed economy which means businesses are
owed by both the public and the private sector.
• Economic system of Ethiopia in Derg regime
✓ Ethiopia during the Derg regime followed command economic system
which means the means of production was largely state owned or the
private sector was not allowed.
• Economic system of Ethiopia in Imperial regime
✓ Ethiopia during the imperial regime followed feudal economic system
which means the resources were largely owned by aristocrats and the
church.
, 10. What are the central problems of an economy? Discuss them in detail.
• The enteral problems of economy are: -
✓ What to produce: - problem of allocation of resource.
✓ How to produce: - problem of choice of technique.
✓ For whom to produce: - problem of distribution of national product.
Work out
1. A. Calculate the opportunity cost of the production of good X at each point. What
law does the trend in those values exhibit?
Oc at point A = 0
90−100
Oc at point B =
2−0 Gives up 5 Good Y
−10
=| | to produce 1 Good X
2
= |-5|
=5
60−90
Oc at point C =
4−2 Gives up 15 Good Y
−30
=| | to produce 1 Good X
2
= |-15|
= 15
20−60
Oc at point D =
6−4
−40 Gives up 20 Good Y
=| | to produce 1 Good X
2
= |-20|
= 20
B. What changes are required for their economy to shift the PPF outward?
• Changes required to shift the PPF outward are: -
1. Increase in the quantity or / and quality of economic resources.
2. Advancement in technology.
Graphically
Good Y Y
100
90
60 Out ward
shift of PPC
20
Good X X
0 2 4 6
By Yoftahe H
In Addis Ababa University
Unit one review questions
1. Define economics from perspective of wealth, welfare, scarcity and growth. Which
definition more suits for economics? Why?
Wealth perspective
• Economics is accumulation of valuable economic resource by producing
goods and services to generate income.
Welfare Perspective
• Economics studies about efficient allocation of scarce resources to satisfy
unlimited human want and studies about income distribution and how this
affects social welfare.
Scarcity Perspective
• Economics studies about how people ese limited resources efficiently to
satisfy unlimited human want.
Growth perspective
• Economics studies about how people use scarce resources efficiently and
increase the production of goods and services of the economy.
✓ More suit for Economics is scarcity, because Economics study, about efficient
allocation of scarce resource to attain maximum unlimited human wants.
2. Why we study economics? Have you gained anything from this chapter? Would you
discuss them please?
• We study economics to know how to manage and efficiently allocate our
scarce resources to get the maximum satisfaction of our unlimited want.
3. Define scarcity, choice and opportunity cost. Can you link them in your day to day
lives?
• Scarcity: is the limitation of resources to satisfy unlimited human want.
• Choice: is an alternative (option) we choose because of scarcity or limitation
of resource.
• Opportunity cost: is the next best alternative that is scarified or forgone to
obtain one more unit of a product.
4. What do you understand by positive economics and normative economics?
• Positive Economics: is concerned is analysis of facts and attempts to
describe the world as it is out any value judgement or it gives scientific
explanation is out any value judgment.
, • Normative Economics: is a matter of opinion or it is subjective in nature
which cannot be proved or rejected with reference to facts. It is leaded with
judgments about what is good or what is bad.
5. Explain why economics deals with allocation and efficient utilization of scarce
resources only?
• Economics deals is allocation and efficient utilization of scarce resources
because it tries to satisfy the unlimited human want is limited resource.
6. In recent years, especially around big cities, there is the problem of air pollution and
the likelihood of poisoning is high. Given this scenario, do you think that air is free
recourse? Justify your answer.
• Air is a free resource because we are not paying any price to breath it.
According to the given scenario there is air population which is the negative
externality of a business organization so there may be a health problem
therefore we are not paying for the air but we may pay for the treatment.
7. Describe the four categories of economic resources. Which category of resources
you and your family owned?
• There are four categories of economic resources: -
A. Land: - a free gift of nature.
B. Labour: - physical and mental effort of human beings.
C. Capital: - all manufactured inputs that can be used to produce another
goods and services.
D. Entrepreneurship: - special type of human talent that helps to organize
and manage other factor of production.
• From the above categories of economic resources, me and my family own
land, labour, and capital.
8. What is a production possibility curve?
• Production possibility curve (PPC) shows the various possible combinations
of goods and services that can be produced in given resource and technology.
9. Discuss the economic system in Ethiopia over the recent three regimes (EPRDF,
Derg and imperial regime)
• Economic system of Ethiopia in EPRDF regime
✓ Ethiopia recently follows mixed economy which means businesses are
owed by both the public and the private sector.
• Economic system of Ethiopia in Derg regime
✓ Ethiopia during the Derg regime followed command economic system
which means the means of production was largely state owned or the
private sector was not allowed.
• Economic system of Ethiopia in Imperial regime
✓ Ethiopia during the imperial regime followed feudal economic system
which means the resources were largely owned by aristocrats and the
church.
, 10. What are the central problems of an economy? Discuss them in detail.
• The enteral problems of economy are: -
✓ What to produce: - problem of allocation of resource.
✓ How to produce: - problem of choice of technique.
✓ For whom to produce: - problem of distribution of national product.
Work out
1. A. Calculate the opportunity cost of the production of good X at each point. What
law does the trend in those values exhibit?
Oc at point A = 0
90−100
Oc at point B =
2−0 Gives up 5 Good Y
−10
=| | to produce 1 Good X
2
= |-5|
=5
60−90
Oc at point C =
4−2 Gives up 15 Good Y
−30
=| | to produce 1 Good X
2
= |-15|
= 15
20−60
Oc at point D =
6−4
−40 Gives up 20 Good Y
=| | to produce 1 Good X
2
= |-20|
= 20
B. What changes are required for their economy to shift the PPF outward?
• Changes required to shift the PPF outward are: -
1. Increase in the quantity or / and quality of economic resources.
2. Advancement in technology.
Graphically
Good Y Y
100
90
60 Out ward
shift of PPC
20
Good X X
0 2 4 6
