1. The Market System: Unit 1 - 2

Question 1

What are Needs?
What are wants?

Answer 1

• Needs basic requirements for human survival.
• Wants people’s desires for goods and services

Question 2

What is the basic economic problem?
What are the 3 critical decisions?

Answer 2

• The basic economic problem is scarcity where the issue with limited resources but unlimited wants.
• • What to produce?
• • How to Produce?
• • For whom to Produce?

Question 3

What is scarce resources?

What is opportunity cost?

Answer 3

• Amount of resources available when supply is limited to satisfy all wants.
• Opportunity cost is the cost of the next best alternative given up when making a choice.

Question 4

What are capital goods?
What are consumer goods?

Answer 4

• Capital goods are those purchased by firms and used to produce other goods.
• Consumer goods are those purchased by households/ customers / to end consumer.

Question 5

What is the production possibility curve?

Answer 5

• Line that shows the different combinations of two goods an economy can produce if all resources are used up.

Question 6

What is economic growth?

Answer 6

• Increase in the level of output by a nation.

Question 7

What are the 4 reasons for economic growth?

Answer 7

• New technology.
  
  • Improved Efficiency.
  • Education and training.
  • New resources.

Question 8

What are assumptions?
What is irrational?

Answer 8

• Assumptions are things that you think are true although you have no definite proof.
• Irrational not based on clear thought or reasons.

Question 9

What are the 2 ways consumers aim to maximize benefit?

Answer 9

• By low price
• by high quality

Question 10

What are the 2 ways businesses aim to maximize profit?

Answer 10

• By increasing prices on their product.
• By reducing the cost of production.

Question 11

Name 3 reasons why consumers may not always maximize their benefit.

Answer 11

• difficulty calculating benefits from consuming a product.
• they develop buying habits.
• they may be influenced by others’ behaviors.

Question 12

Name 4 reasons why producers may not always maximize their profit.

Answer 12

• performance of some businesses may be influenced by the behavior of other people in the organization.
• producers have alternative business objectives.
• May be commercial enterprises.
• Aim to maximize improvements in human or environmental well being.

Question 13

What is administration?

Answer 13

activities involved with managing and organizing the work of a company or organization.