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IB Econ: 1.1 & 1.2

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  • What is the Marxist view on the value of goods? What is one potential criticism?
    Labor theory of value; but value of good also affected by utility!
  • What are the three basic economic questions? Briefly elaborate.
    What to produce, how to produce, for whom to produce.
  • Using a PPC, draw out a scenario of "actual growth"
    Must be fully labeled; PPC does NOT shift outward.
  • Briefly summarize Jean-Baptiste Say's views on economics.
    supported the laissez faire approach and believed that ‘supply creates its own demand’
  • Explain the argument that the private sector is more efficient than the public sector in providing goods and services in an economy.
    profit oriented = maximize profits & minimize costs + competition adds to more efficient allocation of resources
  • Explain why the concept of scarcity is linked to the concept of sustainability.
    Threats to sustainability arises due to scarce resources; if we used up scarce resources in the present day, future generations are unable to meet their needs.
  • Distinguish between Obama and Richard Burr’s views on the role of the government in managing the economy.
    Obama = government spending to decrease unemployment, rejected the view that the government has no role; Burr says government spending money does not work!
  • What is Pareto efficiency? How is it illustrated on the PPC?
    A firm / economy that is operating on the curve is Pareto efficient - one cannot be better off without making another worse off.
  • Due to COVID-19, the HK government issued consumption vouchers to the general public. Relate this decision back to THREE WiSE ChOICES concepts.
    Intervention (e.g. intervene to stabilize economy), choice (helping the economy heres means giving up the choice to spend elsewhere), equity
  • Why are there opportunity costs?
    They arise due to the need to make choices as there are scarce resources.
  • Identify all nine of the WISE ChOICES key concepts.
    Well-being, interdependence, scarcity, efficiency, choices, intervention, change, equity, sustainability
  • Explain why economics is considered a "social science".
    Scientific methodology to build knowledge (scientific) + deals with human behavior (social)
  • Using a concrete example, explain why consumers might not always act rationally.
    Consumers' satisfaction affected by psychological biases (e.g. prices of wines)
  • Using a PPC, illustrate a scenario in which there is a constant opportunity cost between two goods (use actual goods)
    E.g. farming goods, same colored pens
  • Provide an example of a normative and a positive statement in Economics.
    Positive: raising income taxes decreases consumption, normative: the government should raise income taxes to increase its budget.
  • Using an example, explain the opportunity cost that a private company might face when it comes to its daily operations.
    The opportunity cost of funding a new product may be to expand into a new geographical location, assuming it's the best choice forgone.
  • Provide an example to illustrate how a good can be both considered a free and economic good under different circumstances.
    E.g. seawater vs. water in a desert
  • Outline the key differences between the Keynesian vs. Monetarist views on macroeconomics.
    Keynesian = need government spending to stabilize economy and spend out of recession; Monetarist = spending won't work and simply leads to inflation
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