Economics involves both normative and positive analysis, but focuses mainly on positive analysis. Normative analysis makes judgments about what policies should be adopted, while positive analysis objectively studies economic systems. Scarcity means that resources are limited in relation to human wants, and nothing escapes scarcity. Governments may reduce scarcity through policies that influence production or consumption. The production possibilities frontier illustrates the scarcity concept by showing tradeoffs between alternative goods, and economies can achieve points outside the curve through technological advances or by importing resources. Points beneath the curve result if resources are not fully or efficiently utilized.

1. Discuss the difference between normative economic analysis
and positive economic analysis. Is economics concerned mainly
with normative or positive analysis? Briefly explain.
Discuss the concept of scarcity. Can you think of anything that
is not scarce according to the economic definition? How might
governments reduce scarcity?
Discuss the significance of the production possibilities frontier.
How can economies achieve points of production that lie
outside the curve? What might cause an economy to produce at
points beneath the curve?