Economics for

Managers
Tutorial Session 01
Focus Areas
• Definition 
• Branches of economics
• Positive vs Normative
economics
• Basic Economic Concepts
What is "Economics"?
What is "Economics"? Cont.

The subject matter of economics is the

production and expansion of wealth  
  
  Adams Smith (1723-1790)
Question 01

Define economics in your own

terms?
What is "Economics"?

Economics is a social science which

studies how people allocate their
limited resources to satisfy their
unlimited wants to maximize their
gains.
 Question 02
The birth of economics as an intellectual discipline can
be dated precisely in the eighteenth century with 

a. The publication of the book, The Wealth of Nations. 

b. The opening of the London stock exchange. 
c. The development of the factory system. 
d. The introduction of paper currency.
Branches of Economics
MICROECONOMICS
The branch of economics that studies
individual units

MACROECONOMICS
The branch of economics that studies
aggregates or totals of the economy 
 Question 03
Which of the following statements is true?
a. Microeconomics is concerned chiefly with
the economy as a whole.
b. Macroeconomics is concerned chiefly with
individual units.
c. Macroeconomics is concerned chiefly with
the economy as a whole.
d. Economic Growth can be considered as a
microeconomic concept.
 Question 04
Which of the following statements about Macroeconomics
is false?
a. It studies individual consumers, households, and
business firms at individual level
b. It focuses on the economy as a whole
c. Monetary policy, National income,
Unemployment are some concepts discussed in
Macroeconomics.
d. The general price level of a country is studies
under Macroeconomics
 Question 05
Microeconomics deals with the study of __________
economic entities. 
a. Aggregate 
b. Individual 
c. Macro 
d. Socio
 Question 06
Macroeconomics deals with _________ economic entities.
a. Aggregate
b. Individual
c. Micro
d. Socio
 Question 07
Which of the following are macroeconomic issues, and
which are microeconomic ones?
1. Inflation
2. Low wages in the textile industry
3. Why the price of cabbages fluctuates more than that of
cars?
4. The rate of economic growth this year compared with
the last year
5. The decline of traditional manufacturing industry
Positive vs Normative 
economics
Positive Economics focuses on actually what has
happened, what is happening or what will happen based
on the prevailing or expected circumstances

Normative Economics focuses on what is expected or

planned according to the expectations
 
 Question 08
Which of the following are positive statements, and which
are normative statements?
1. Cutting the higher rates of income tax will redistribute
incomes from the poor to the rich.
2. Inflation should not be reduced, as it means that there
will be a higher unemployment.
3. Putting up interest rates will reduce inflation.
4. The government should raise interest rates in order to
prevent the exchange rate falling.
 Question 09

Suppose that an economist tells you that people in the United

States should always save 20% out of their income. This is
an example of ________ statement. 
a. a political statement
b. a positive statement
c. a normative statement
d. None of the above
 Question 10
Select the positive statement from below, 
a. Central bank should reduce the rate of growth of
money 
b. The Government must increase the minimum wage 
c. Lower tax rates encourage more work and more
savings 
d. Unemployment of youth should be reduced to the
minimum possible level within a shorter period
 Question 11
When Mr. Bandara makes the statement, "The cost of living
has increased 10 percent over the past 10 years," he is
a. making a normative statement.
b. facing the standard of living tradeoff.
c. testing an economic model.
d. making a positive statement.
 Question 12
When Ms. Siriwardhana makes the statement, "The
government should spend less money to take care of national
parks," she is
a. facing the standard of living tradeoff.
b. testing an economic model.
c. making a positive statement.
d. making a normative statement.
 Question 13
"The rich should pay higher income tax rates than the poor" is
an example of a
a. normative statement.
b. theoretical statement.
c. positive statement.
d. descriptive statement.
 Question 14
The statement "An increase in the price of gasoline will lead to
a decrease in the amount purchased" is
a. a political statement.
b. a positive statement.
c. a scientific statement.
d. a normative statement.
 Resources
Anything which can be used to satisfy human needs and
wants
1. Lands (Natural Resources) = Rent
2. Labor ( Human Resources) Human effort = Wages

3. Capital ( man-made resources)

• Human creations that are used to produce goods and services = Interest
Physical Capital (Taxi Driver’s cab)
Human Capital ( Taxi driver’s knowledge)
4. Entrepreneurship = Profit
Question 15
Which of the following is the best
explanation of economic resources?
a. Resources used in the economy
b. Land and capital
c. Land, labor and technology
d. All factors used in the
production of goods or services
 Question 16
Which of the following is NOT a capital resource?
a. Machinery
b. Equipment
c. Copper
d. A factory
 Question 17
Which of the following is a non-renewable resource?
a. Wind power
b. Solar power 
c. Hydro power
d. Fossil fuels
 Question 18
Which of the following answers applies to renewable
natural resources? 
a. Once the renewable natural resource is
used , is gone forever.
b. Renewable resources can be replenished.
c. renewable resources are costly to extract.
d. Non of the above. 
 Question 19
Briefly explain the relationship between economics and
scarcity.
Scarcity
Needs and Wants Resources
>
(Unlimited) (Limited)

Basic Economic Problem

Scarcity
(Limitedness of resources compared to
unlimited Needs and Wants)

Choices to get the maximum benefit from the

available resources
• Economics is the science

of which studies human

behavior between ends
& scare means which
have alternative uses
Lionel Robbins
( 1898 –1984)
 Question 20
“Scarcity exists in poor countries as well as in rich
countries” Do you agree with the statement. Justify your
answer.