1. What is the difference between a positive and a normative statement? Give an example of each. - A positive statement is a factual claim that can be tested and verified by observation or data. A normative statement is a value judgment that expresses an opinion or preference about what should be done or how things ought to be. For example, "The unemployment rate in the US is 6.2%" is a positive statement, while "The government should increase the minimum wage to reduce poverty" is a normative statement. 2. What are the three basic economic questions that every society must answer? How do different economic systems answer them? - The three basic economic questions are: what to produce, how to produce, and for whom to produce. Different economic systems answer them differently based on the degree of government intervention and the role of markets. For example, in a command economy, the government decides what, how, and for whom to produce, while in a market economy, the decisions are made by the interactions of consumers and producers based on their preferences and incentives. 3. What is the law of demand? What are some factors that can cause a change in demand? How do they affect the demand curve? - The law of demand states that there is an inverse relationship between the price of a good or service and the quantity demanded, holding other factors constant. Some factors that can cause a change in demand are: income, preferences, prices of related goods, expectations, and number of buyers. They affect the demand curve by shifting it either to the right (increase in demand) or to the left (decrease in demand). 4. What is the law of supply? What are some factors that can cause a change in supply? How do they affect the supply curve? - The law of supply states that there is a direct relationship between the price of a good or service and the quantity supplied, holding other factors constant. Some factors that can cause a change in supply are: costs of production, technology, prices of related goods, expectations, and number of sellers. They affect the supply curve by shifting it either to the right (increase in supply) or to the left (decrease in supply). 5. What is equilibrium? How can we determine the equilibrium price and quantity in a market? - Equilibrium is a situation where the quantity demanded equals the quantity supplied at a given price. We can determine the equilibrium price and quantity in a market by finding the point where the demand curve and the supply curve intersect. 6. What is elasticity? How can we measure the price elasticity of demand and supply? What are some factors that affect elasticity? - Elasticity is a measure of how responsive one variable is to changes in another variable. We can measure the price elasticity of demand and supply by using the formula: % change in quantity / % change in price. Some factors that affect elasticity are: availability of substitutes, necessity vs luxury, proportion of income, time horizon, and nature of goods.