ECS1501 Assignment 01 Questions and Answers

Questions
Indicate whether the following statements are true (T) or false (F):
1. Scarcity and choice are central elements of economics.
2. Scarcity is a problem in poor countries only.
3. The problem of scarcity arises because wants are unlimited and the resources
(or means) to fulfil these wants are limited.
4. An economy's capacity to produce is limited by the quantity and quality of the
available resources.
5. The opportunity cost of a choice is the value of the best foregone opportunity
(or alternative).
6. Leisure time sacrificed to study Economics is an example of an opportunity
cost.
7. If Johannes resigns from his salaried job to open his own business, the salary
he earned previously must be included in the opportunity cost of the business.
Answers
1. True
2. False, It is a problem facing all countries: rich or poor, developed or
underdeveloped; it also applies to all people.
3. True
4. True
5. True
6. True
7. True


Questions
Indicate whether the following statements are true (T) or false (F):
1. A production possibilities curve indicates combinations of goods or services
which can be produced when the community's resources are employed fully
and efficiently.
2. A country's production possibilities curve illustrates a particular combination of
goods and services that is most desirable for the inhabitants of that country.
3. Any point on the production possibilities curve represents an attainable
combination of goods and services.
4. Any point outside or to the right or beyond the production possibilities curve
represents an unattainable combination of goods and services.
5. Any movement from one point on a production possibilities curve to another
point on the curve illustrates the principle of opportunity cost.
Answers
1. True, This is the definition of the production possibilities curve.
2. False, See the definition of the production possibilities curve.
3. True

, 4. True
5. True


Questions
Indicate whether the following statements are true (T) or false (F)
1. The distinction between goods and services is that goods are tangible while
services are intangible.
2. Capital goods are goods that are used in the production of other goods.
3. Consumer goods are goods that are used in the production of goods which
are ultimately purchased by consumers.
4. Capital goods lose their value (depreciate) over time.
5. Intermediate goods are goods that are used as inputs in the production of
other goods.
6. The beans bought by a factory to produce tins of baked beans are
intermediate goods.
7. The beans bought by Mrs Jones to prepare bean soup for her family are
intermediate goods.
8. All the goods purchased by a family for own consumption at Pick 'n Pay are
final goods.
9. All the goods purchased at a Shoprite Checkers store are not private goods,
since any member of the public may purchase goods at such a store.
10. Scarce goods are called economic goods.
11. Goods that are not scarce and therefore have no price are called free goods.
12. Washing powder is a heterogeneous good since there are different varieties
or brands of washing powder, like Omo, Surf and Skip.
13. An increase in the available resources can be illustrated by a rightward shift of
the production possibilities curve.
14. Economic growth can be illustrated by a rightward shift of the production
possibilities curve.
15. The utilisation of previously unemployed resources will shift the production
possibilities curve outward (to the right).
16. Unemployment is indicated by a leftward shift of the production possibilities
curve.
17. Unemployment is indicated by a rightward shift of the production possibilities
curve.
18. Unemployment is indicated by a point inside the production possibilities curve.
Answers
1. True
2. True
3. False, Consumer goods are not used in the production of goods. Consumer
goods are meant for final consumption.
4. True
5. True, For example, the flour used by the baker to bake bread which will be
sold later, is an intermediate good.