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Table of Contents

  1. Chapter Two: How Economists Work

Chapter Two: How Economists Work

1
Question 1

Which one of the following is a normative statement?

a)
b)
c)
d)
e)
Correct.Incorrect. The answer is c) The government should do more to prevent flooding.Your answer has been saved.
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2
Question 2

Which one of the following is a positive statement?

a)
b)
c)
d)
e)
Correct. Incorrect. The answer is e) The congestion charge has reduced Central London traffic by 20 per cent. Your answer has been saved.
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3
Question 3

A time-series graph shows:

a)
b)
c)
d)
e)
Correct.Incorrect. The answer is c) The value of one or more variables at different points in time.Your answer has been saved.
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4
Question 4

If the relationship between consumer spending (C) per year and disposable income (Y) per year is: C = £1000 + 0.8 Y, what will consumer spending be when income is £30,000 per year?

a)
b)
c)
d)
e)
CorrectIncorrect. The asnwer is b) £25,000Your answer has been saved.
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5
Question 5

Which of the following is not one of the normal meanings of the term "model" in the context of economics?

a)
b)
c)
d)
e)
Correct.Incorrect. The answer is d) An ideal type of outcome.Your answer has been saved.
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6
Question 6

Classify the following statements according to whether they are positive or normative:

a) all individuals should take more exercise;
b) France has lower unemployment than Brazil;
c) incomes are unfairly distributed between countries' populations;
d) when prices rise consumers buy fewer goods and services;
e) final year grades are a function of students' class attendance records;
f) smoking should be banned in all public places.

Hint: re-read 'Economic advice: positive and normative statements' pp16-17.Hint

7
Question 7

Why do economists make assumptions about the behaviour of variables within models?

Hint: Re-read 'assumptions' p18.Hint

8
Question 8

Is it a bad thing that economists sometimes disagree with each other?

Hint: re-read pages 'Why do economists often disagree' 21-22.Hint

9
Question 9

What is wrong with the following statement: 'Water always boils at 100 degrees centigrade'? How could you disprove the statement?

Hint: Re-read Box 2.3 'Testability' p21Hint

10
Question 10

In what ways could you present the following information in an essay or report:

(a) inflation figures for ten countries for January 2007;
(b) monthly inflation figures for the UK from January 1998 - January 2007;
(c) the composition of the UK's Gross Domestic Product in 2006
(d) annual Gross Domestic Product figures for the UK between 1990-1999.

Under what circumstances might one type of presentation be superior to another?

Hint: re-read 'Economic data' pp22-25.Hint

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Question 11

(a) Identify ten variables that you think might impact upon the ground attendance at a major outdoor sports event (e.g. an important soccer match or tennis game).
(b) Express your list in the same form as equation (1) p26.
(c) Which of the variables you have cited are likely to have a positive impact upon attendance; which are likely to have a negative impact on attendance and which might it be difficult to identify a positive or negative impact?

Hint: re-read 'Functions' p26Hint

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Question 12

Consider the following equation: QD = 250 - 2.5P, where QD denotes the quantity of biscuits demanded by an individual in given time period and P denotes the per unit price of biscuits.

(a) Is QD the dependent or independent variable?
(b) Sketch the relationship between quantity demanded and price, putting quantity demanded on the x-axis and price on the y-axis of your graph.
(c) For the prices identified in the box below, estimate the number of biscuits that will be demanded:

Price of biscuits Quantity Demanded
0
20
50
80

Hint: re-read 'assumptions' p18 and 'Graphing economic relationships' pp26-30Hint

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Question 13

Economics are amongst the best paid graduates in the UK. What skills do you think economics graduates can bring to the workplace?

Hint: consider Chapter Two as a whole.Hint