Foundations of Economics

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What is the primary focus of economics?
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The primary focus of economics is how individuals and societies allocate scarce resources to satisfy unlimited wants.
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What is scarcity in economics?
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Scarcity refers to the limited nature of resources, meaning there are not enough resources to meet all human wants.
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Why is scarcity a fundamental issue in economics?
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Because it forces individuals and societies to make choices about how to allocate resources efficiently.
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What are opportunity costs?
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Opportunity costs refer to the value of the next best alternative that is forgone when making a decision.
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What are the three basic economic questions every society must answer?
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1. What to produce? 2. How to produce? 3. For whom to produce?
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What does 'resource allocation' mean in economics?
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Resource allocation refers to how scarce resources are distributed for the production of goods and services in an economy.
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What is a model in economics?
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An economic model is a simplified representation of reality used to understand and predict economic phenomena.
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How do economic models help in understanding the world?
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They provide frameworks for analyzing relationships between different economic variables and predicting outcomes.
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What is the method of economics?
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The method of economics involves defining questions, developing models, and using data to test hypotheses and make predictions.
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How does positive economics differ from normative economics?
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Positive economics deals with what is, based on data and facts, while normative economics involves value judgments about what ought to be.
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What is the significance of economic thought?
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Economic thought outlines the evolution of ideas and theories about how economies function, influencing policy and practice.
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Who is considered the 'father of modern economics'?
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Adam Smith is considered the 'father of modern economics,' known for his work "The Wealth of Nations."
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What role did Adam Smith play in economic thought?
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Adam Smith introduced concepts such as the 'invisible hand' and specialization, which laid the groundwork for classical economics.
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What is the 'invisible hand' theory?
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The 'invisible hand' is a metaphor for the self-regulating nature of the marketplace, guiding individuals to unintentionally benefit society.
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What is the historical significance of 'The Wealth of Nations'?
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Published in 1776, it systematically addressed the dynamics of wealth creation and introduced ideas foundational to modern economic theory.
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