chapter 2. Economic Activites

Multiple Choice

1. C
2. A
3. B
4. A
5. C
6. D
7. B
8. A
9. D
10. B 

Essay


1. Explain the definition of consumption, production, and distribution!
2. Explain the difference between consumption, production, and distribution!
3. Explain the consumer behavior with the indifference curve approach!
4. Explain the economic activity circular flow diagram!
5. Explain the role of  consumption households and firms households!
6. Explain the role government and society!
7. Explain the role of foreign customers and producers!
8. Give detail explanation on every economic entities in an economy!
9. Explain the flows formed by the interaction between consumption households and firms households!
10. Explain types of incomes received by consumption households!

Answered

1.  Consumption is the direct usage of goods and services to fulfill one's needs. Production is making goods or providing services. Distibution are all of the goods handling activities starting from the producers all the way to the hands of the costumers.
2. If the consumption to use the goods an service, the production is to produce the goods and service, and the distribution is to distribute all the goods and the services. 
3. In maximazing their satisfication, consumers are restrained by their constrained budgets. They cannot reach the highest satisfaction level because their consumption is limited by their budget constraint
4. Circular flow diagram which consists of two-sector and four-sector diagram. Circular flow diagram with two-sector : Two kinds of market are established as a consequence of this interaction between consumption household and firms consumption. The first is product market. In this market, household buy goods and services that produced by firms. The second one is factor market, where firms buy inputs such as labour, capital, andland from households.