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MICROECNOMICS EXAM NEWEST VERSION -2025/2026- 100+
Q AND ANS MOST POPULAR EXAM GUARANTEED SUCCESS
Cost-benefit principle
Every purchase is a trade-off
Rational decision makers
An assumption that economic agents weigh the marginal benefit that one receives
from a good or service against its marginal cost
Economic agents
Decision makers that have effects on the economy of a country by buying selling,
producing, investing, taxing, etc. Government, firms and households
Positive statement
An objective statement that can be tested, amended or rejected by referring to
available evidence
Normative statement
A value judgement that is a subjective statement of opinion rather than a fact that
can be tested
Needs vs Wants
Needs are defined as goods or services that are required and cannot be done
without. Wants are goods or services that are not a necessity but we desire/wish
for
Government
, 2
Elected representative of the consumers that should act on behalf of the people.
The government must decide whether or not to intervene in the economy or leave
it as is.
Firms
An organisation that uses factors of production alongside each other in order to
produce output. They produce goods and services demanded by consumers
Households
A group of consumers that buy goods and services. They also supply their labour
to firms to produce goods and services in order to earn the income needed to
purchase g+s
Factors of production
The available resource inputs used in the production process of g+s (Capital,
Enterprise, Land and Labour)
Capital
Man made aids for production; goods used to make other goods
Entrepreneurship
The willingness of an entrepreneur/individual to take risks and organise
production. An entrepreneur is someone who bears the risk of a business and
organises production
Labour
The human resource that is available in the economy; the quantity and quality of
human resources
Land
The natural resources available in the economy; the quantity and quality of
natural resources
Factor payments/rewards
, 3
Capital=Interest
Enterprise=Profits
Labour=wages
Land=rent
A model
A simplified representation of reality used to create hypotheses about economic
decisions and events
Production
Any economic activity that leads to a flow of goods and services for which people
are willing and able to pay
Production possibility frontier
A curve showing the maximum quantities of different combinations of goods and
services that can be produced in a set time period given the available resources
and current state of technology
Law of diminishing returns
As a firm adds variable factors of production(usually labour) to fixed capital, the
marginal returns that the firm gains will gradually begin to decrease
Consumer good
A finished good that is sold for consumption
Capital good
Ant tangible asset that an organisation uses to produce goods or services such as
office buildings, machinery etc.
Specialisation
Where individuals, businesses and whole economies are not self-sufficient but
concentrate on producing certain goods and services, then trading their surplus.
, 4
Division of labour
The assignment of different parts of a manufacturing process or task to different
specialised people in order to improve efficiency
Productivity
Output of a good or service, per factor of production, per period of time
Functions of money
A medium of exchange-it should be accepted universally for the payment of
goods, services and debt
Unit of account-It allows the value of goods, services and other assets to be
compared so that the prices of products reflect the value that society places on
them
Standard of deferred payment-Money can be used to pay back debt
Store of value-It must be possible to use for future transactions and so it must be
non-diminishable
Resource allocation
The way in which a society's factors of production are divided amongst their
alternative uses
Objectives of households
Households make decisions about how to allocate expenditure based on the
utility they derive from consuming a good or service
Objectives of firms
Firms make decisions about what to produce and how much to produce (how to
use their factors of production) in order to receive a return/profit for their
endeavours.
Objectives of the government
MICROECNOMICS EXAM NEWEST VERSION -2025/2026- 100+
Q AND ANS MOST POPULAR EXAM GUARANTEED SUCCESS
Cost-benefit principle
Every purchase is a trade-off
Rational decision makers
An assumption that economic agents weigh the marginal benefit that one receives
from a good or service against its marginal cost
Economic agents
Decision makers that have effects on the economy of a country by buying selling,
producing, investing, taxing, etc. Government, firms and households
Positive statement
An objective statement that can be tested, amended or rejected by referring to
available evidence
Normative statement
A value judgement that is a subjective statement of opinion rather than a fact that
can be tested
Needs vs Wants
Needs are defined as goods or services that are required and cannot be done
without. Wants are goods or services that are not a necessity but we desire/wish
for
Government
, 2
Elected representative of the consumers that should act on behalf of the people.
The government must decide whether or not to intervene in the economy or leave
it as is.
Firms
An organisation that uses factors of production alongside each other in order to
produce output. They produce goods and services demanded by consumers
Households
A group of consumers that buy goods and services. They also supply their labour
to firms to produce goods and services in order to earn the income needed to
purchase g+s
Factors of production
The available resource inputs used in the production process of g+s (Capital,
Enterprise, Land and Labour)
Capital
Man made aids for production; goods used to make other goods
Entrepreneurship
The willingness of an entrepreneur/individual to take risks and organise
production. An entrepreneur is someone who bears the risk of a business and
organises production
Labour
The human resource that is available in the economy; the quantity and quality of
human resources
Land
The natural resources available in the economy; the quantity and quality of
natural resources
Factor payments/rewards
, 3
Capital=Interest
Enterprise=Profits
Labour=wages
Land=rent
A model
A simplified representation of reality used to create hypotheses about economic
decisions and events
Production
Any economic activity that leads to a flow of goods and services for which people
are willing and able to pay
Production possibility frontier
A curve showing the maximum quantities of different combinations of goods and
services that can be produced in a set time period given the available resources
and current state of technology
Law of diminishing returns
As a firm adds variable factors of production(usually labour) to fixed capital, the
marginal returns that the firm gains will gradually begin to decrease
Consumer good
A finished good that is sold for consumption
Capital good
Ant tangible asset that an organisation uses to produce goods or services such as
office buildings, machinery etc.
Specialisation
Where individuals, businesses and whole economies are not self-sufficient but
concentrate on producing certain goods and services, then trading their surplus.
, 4
Division of labour
The assignment of different parts of a manufacturing process or task to different
specialised people in order to improve efficiency
Productivity
Output of a good or service, per factor of production, per period of time
Functions of money
A medium of exchange-it should be accepted universally for the payment of
goods, services and debt
Unit of account-It allows the value of goods, services and other assets to be
compared so that the prices of products reflect the value that society places on
them
Standard of deferred payment-Money can be used to pay back debt
Store of value-It must be possible to use for future transactions and so it must be
non-diminishable
Resource allocation
The way in which a society's factors of production are divided amongst their
alternative uses
Objectives of households
Households make decisions about how to allocate expenditure based on the
utility they derive from consuming a good or service
Objectives of firms
Firms make decisions about what to produce and how much to produce (how to
use their factors of production) in order to receive a return/profit for their
endeavours.
Objectives of the government
