(a) State Professor Robbins’ definition of Economics. (b) Explain the following concepts: (i) opportunity cost; (ii) scale of preference; (iii) production p...

(a) State Professor Robbins’ definition of Economics.

(b) Explain the following concepts:

 (i) opportunity cost;
(ii)  scale of preference;
(iii) production possibility curve.

(c) Outline three reasons for the study of Economics as a Subject.

Answer Details

(a) Professor Robbins defined Economics as "the science which studies human behavior as a relationship between ends and scarce means which have alternative uses."

(b)

1. (i) Opportunity cost: Opportunity cost refers to the cost of the next best alternative forgone when making a choice. It is the value of the next best option that is given up in order to pursue a particular choice.
2. (ii) Scale of preference: Scale of preference refers to the ranking of wants or desires of an individual or society based on their relative importance. This ranking determines how limited resources are allocated among different wants.
3. (iii) Production possibility curve (PPC): Production possibility curve is a graphical representation of the possible combinations of two goods that a society can produce given its available resources and technology. It shows the trade-offs that must be made when choosing between the production of two goods.

(c) There are three main reasons for studying economics:

1. 1. Understanding how the economy works: Economics helps us understand how the economy functions, how resources are allocated, how businesses operate, and how consumers make decisions.
2. 2. Making informed decisions: Economics provides the tools to make informed decisions about how to allocate scarce resources, how to invest money, and how to make optimal choices.
3. 3. Improving well-being: Economics helps us to understand how to improve the well-being of individuals and society by examining issues such as income inequality, poverty, and unemployment. It also helps us to understand the impact of policies and regulations on the economy and on society as a whole.