1 The basic economic problem

Question 1

Economics

Answer 1

A social science that deals with the consumption, production, allocation of resources and distribution of goods and services.

Question 2

The basic economic problem

Answer 2

Scarcity is a basic economic problem of any society. Every society has limited (finite) resources and unlimited wants.

Question 3

Scarcity

Answer 3

The problem of unlimited wants and limited resources. Scarcity requires people to make choices and decisions about how to allocate resources efficiently to satisfy basic needs and as many wants as possible.

Question 4

Needs

Answer 4

Goods and services that meet a human’s basic requirements for life.

Question 5

Wants

Answer 5

Goods and services that humans desire beyond their basic needs.

Question 6

GDP (gross domestic product)

Answer 6

The value of the goods and services produced within a country’s borders in one calendar year.

Question 7

Economic agents

Answer 7

Are households(private individuals in society), firms that operate in the private sector of an economy and the government(the public sector of an economy).

Question 8

Three basic economic questions

Answer 8

What is it?
How to produce it?
Whom from?

Question 9

Good

Answer 9

A physical product that you own and get utility from it

Question 10

Service

Answer 10

Something you pay for but don’t own/keep

Question 11

Free good

Answer 11

Good with no opportunity cost
e.g. water, air

Question 12

Economic good

Answer 12

A good with some benefit to society and an opportunity cost. It can include both private and public goods.

Question 13

Private good

Answer 13

Rivalry and excludable (limited)
e.g. coca-cola

Question 14

Public good

Answer 14

Non-rivalry and non-excludable (Not free)
e.g. street lights

Question 15

Factors of production

Answer 15

Capital: The more capital, the more things you can afford.
Entrepreneurs: The better ideas, the higher skilled the better moderation.
Land: The natural resource required.
Labour: the people to work required to perform tasks.
(CELL)

Question 16

Scarce resources

Answer 16

Land, labour, capital and enterprise needed to produce goods and services.

Question 17

Geographical mobility

Answer 17

Refers to the extent to which labour is willing and able to move to different locations for employment purposes.

Question 18

Occupational mobility

Answer 18

refers to the ease with which a person is able to change between jobs.

Question 19

Government policies

Answer 19

can affect the cost of production (tax and subsidies)

Question 20

How does new technologies affect firms?

Answer 20

Allow firms to produce more output.

Question 21

how does the net migration of labour affect firms

Answer 21

will affect the quantity of labour.

Question 22

rent

Answer 22

The income a land or capital owner receives from leasing a piece of land.

Question 23

Wages

Answer 23

The income a labourer receives from the skills he or she sells to firms.

Question 24

Interest

Answer 24

The income received when money saving and the cost of borrowing.

Question 25

Profits

Answer 25

The income an owner of an enterprise earns from selling goods and services; the difference between revenue earned and costs of production.

Question 26

Factor mobility

Answer 26

The ability to transfer factors of production like land, labour and capital from one production task to another.

Question 27

Labour force

Answer 27

People that are currently working and the people that are searching for work.

Question 28

Productivity

Answer 28

When labour is able to produce more goods and services than before with the same amount of resources or cost

Question 29

Opportunity cost

Answer 29

The cost of the next best alternative is given up.

Question 30

Economic resources

Answer 30

Factors of production

Question 31

Production possibility curve

Answer 31

A diagram that shows the opportunity cost of two products.

Question 32

Consumer choices

Answer 32

When a consumer buys something, they sacrifice the ability to buy the next best alternative.

Question 33

Employee choices

Answer 33

Households make decisions as consumers on things like what goods and services to purchase.

Question 34

Producer choices

Answer 34

Some typical choices are how much to produce, what to produce, and for whom to produce it.

Question 35

Government choices

Answer 35

Since almost every country in the world has a mixed economic system, the government and businesses have to make choices about what to produce, how to produce it and for whom to produce it.