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Vallarta, Christine Deanielle L.


July 31,
HETAR HW no. 1

1. Define Micro and Macro economics.

a. Microeconomics deals with the economics of the firms. It focuses on
the behavior of a particular unit of the economy such as the customers,
producers and specific markets. Here, you will often encounter terms like
consumers behavior, production theory, cost and profit, and market
b. Macroeconomics deals with the aggregates. Its scope is wider as it
studies the entirety of an economy, whether national or international, and
attempts to determine economic changes. Here, the initial discussions
begin with how growth and output are measured and how multipliers
work. Labor, employment and inflation are included for long-term effects,
as well as monetary, fiscal and trade policies.
2. Differentiate Positive Economic Analysis from Normative Economic
a. Positive Economic Analysis describes what exists and how things
work (e.g. Taxes provide government services to the people.)
b. Normative Economic Analysis looks at the outcome of economic
behavior through judgments and prescriptions for courses of actions (e.g.
Government should levy more taxes to provide more services to the
3. Distinguish post hoc, ceteris paribus and fallacy of composition.
a. Post hoc post hoc ergo propter hoc fallacy, relates two events as if the
first event causes the second one to happen. It is commonly constructed
in this form: A occurred immediately before B. Therefore, A caused B.
b. Ceteris paribus means all things are being equal or held constant;
generalizing events as if they were all the same and all the results were
c. Fallacy of composition states that what is true for a component is also
true for the entire thing.
4. Distinguish economic system from command economic system.
a. Market economic system the three questions (What to produce?,
How to produce? and For whom to produce?) are respectively
answered by: producing goods that yield high profits; producing at
constant returns to scale with minimum costs; and distributing the
goods to those who can afford to buy them.
b. Command economic system all resources are owned by the
government. The question What to produce? is answered by producing

more public good like roads, public schools, and public hospitals. The
question How to produce? is answered by employing all possible
laborers and using the available machinery and equipment. The
government answers the final questions by producing for the public.
c. Mixed economic system all three questions are answered by both the
government and private entities in consideration of their mutual benefit.
5. Differentiate opportunity cost from trade-off.
a. Opportunity cost one of the pervasive effects of scarcity; cost of giving
up an alternative by selecting the next best choice.
b. Trade-off good points that are given up in order to get another.