1.0

Question 1

What is the economic problem?

Answer 1

Humans have unlimited wants but resources are scarce
we must rank what we put resources towards so the most preferred attains resources

Question 2

Explain Wants

Answer 2

Wants are things that make life more easier or pleasurable and can be individual (a shiny new mercedees etc) collective (healthcare), wants are unlimited, wants can be recurrent and wants change over time

Question 3

4 key economic issues

Answer 3

What to produce?
How much to produce?
How to produce? (most efficient way)
How to distribute production?

Question 4

What is opportunity cost?

Answer 4

Satisfying one want will cost the next best alternative want, represents another use of resources

Question 5

What is the production possibility frontier?

Answer 5

Demonstrates opportunity cost when producing two alternative products. Is possible to go under curve if resources aren’t maximised, only way to increase the curve is finding more resources or a more efficient production method is found.

Question 6

What are consumer goods

Answer 6

Goods that are produced for immediate satisfaction of wants and needs like a holiday

Question 7

What are capital goods?

Answer 7

Goods that are produced to increase production capacity in the future (computers, machinery)

Question 8

Determinants affecting demand

Answer 8

Price of other goods and services
Expected future prices
Consumer tastes/preferences
Consumer incomes

Question 9

Determinants affecting supply

Answer 9

Price of other goods and services
State of technology - advancements in production
Changes to costs of factors of production

Question 10

What is price elasticity

Answer 10

Responsiveness of a product’s demand when a price change occurs
Either elastic, unit elastic or inelastic