Chapter 1

Question

Answer(s)

'Malawi ought to undertake policies to make its healthcare sector accessible to the majority of the population'.

normative

A key driver of the market system lies in the fact that participants act__.

in their own self-interest

A major argument for the market system, which does not necessarily have to do with economics, is the system's emphasis on __.

personal freedom

A market system allows for the private ownership of _____ , communicates through _____, and coordinates economic activity through _____.

capital, prices, markets

A positive statement is different from a(n) _____ statement in that it appeals solely to empirical facts.

normative

According to Adam Smith, a curious unity between private interests and social interests would be established when firms and resource suppliers act out of __.

self-interest

After completing her matric with six distinctions, Mala must choose what she will do next year. Her parents are eager for her to study chemical engineering. Mala, however, thinks that it would be best to take a year off in order to gain some practical experience and figure out what she really enjoys. A third option is for her to study economics, which she hears about often in the news, though she is not quite sure it would suit her personality. Mala also has an uncle who is a veterinarian, and has suggested that she train to be a veterinary nurse with him next year. Mala is a bit scared of dogs and isn't sure that she would want to do that. 

The forfeit opportunity to take a year off.

An aggregate is a collection of __. 

specific economic units treated as if they were one unit

As a consumer, your ability to buy goods and services that best suit your preferences and budget is thanks to __.

freedom of choice

Command systems such as those in the Soviet Union and China faced an incentive problem because__.

these systems did not allow for entrepreneurship, so there was never a reward for innovation, output mixes were centrally determined, so production managers never faced penalties for shortages

Complete the following definition of an economic system.

institutional, coordinating, scarcity, market, command

Consider two participants in an economy. Sharon lives as a tenant on a smallholding in the North-West province. She has no proper rental agreement with her landlord and is not sure whether her landlord will allow her to remain on the property for another year. Jabulani has spent the past decade working very hard to save enough money, with which she has just bought a house in a nature estate in Gauteng. 

Jabulani

Consumer sovereignty refers to __.

the fact that consumers determine the types and quantities of goods and services that will be produced with the scarce resources in the economy

Consumers' ability to pay the market price for goods and services will depend on the consumers' __.

income, preferences and the price of the goods

Countries such as the BRICs (Brazil, Russia, India and China) are well-known examples of _____ markets.

emerging

Creative destruction refers to the hypothesis that the creation of new products and production methods simultaneously _____ the market power of existing _____.

destroys, monopolies

David has made R100 000 with his small business, and wishes to invest the full sum so that his money can grow. After reading up a bit more about his options, he has identified two alternatives which seem most suited to his needs.

He forfeits the 5% interest he could have earned

Despite certain limitations, in which of the following ways are economic principles and models highly useful?

Determining cause and effect within an economic system, Understanding how the economy operates, Analysing economic behaviour, Explaining and predicting

Economics is the study of how _____, _____ and _____ make choices, to optimize their level of satisfaction under conditions of _____.

individuals, businesses, institutions, scarcity