1.1

Question 1

The economic problem

Answer 1

satisfy unlimited wants with finite resources

Question 2

Opportunity cost

Answer 2

cost of the next best alternative

Question 3

Factors of production

Answer 3

Capital - Physical goods used in labour process
Enterprise - Entrepreneurship
Land - Natural resources or physical space
Labour - Workforce

Question 4

Production possibility frontiers PPF

Answer 4

dictate productive potential of an economy using two G or S when resources are fully employed and show the opportunity cost of using scarce resources

Question 5

Specialisation

Answer 5

when each worker completes a specific task in a production process

Question 6

Specialisation advantages

Answer 6

higher productivity and quality, greater variety of G+S

Question 7

Specialisation disadvantages

Answer 7

work is repetitive, higher turnover, lead to structural unemployment

Question 8

Medium of exchange

Answer 8

any item that can be widely used to trade for G+S

Question 9

Measure of value

Answer 9

Money measures values of G+S

Question 10

Store of value

Answer 10

Money has to hold its value

Question 11

Method of deferred payment

Answer 11

Money allows debt to be created

Question 12

Free market economy

Answer 12

Governments leave markets to themselves forces of Supply and demand allocate scarce resources

Question 13

Advantages of free market economy

Answer 13

Firms efficient as they provide G+S demanded, free economy can lead to freedom

Question 14

Disadvantages of free market economy

Answer 14

Ignores inequality, monopolies can exploit the market, overconsumption of merit goods

Question 15

Command economy

Answer 15

Governments allocate all scarce resources

Question 16

Advantages of command economy

Answer 16

Easier to coordinate resources in times of crisis, inequality can be reduced, monopoly exploits can be prevented

Question 17

Disadvantages of command economy

Answer 17

Governments fail, won’t meet consumer preference, limits freedom

Question 18

Mixed economy

Answer 18

has features of both command and free market economies