1.1

Question 1

what is the purpose of economic activity

Answer 1

the production of goods and services to satisfy needs and wants

Question 2

what are the key economic decisions

Answer 2

what to produce? how to produce? who benefits from the goods and services?

Question 3

what is economic welfare

Answer 3

the benefit gained by individuals, firms or society in the production of goods and services

Question 4

what are ‘needs’

Answer 4

things that are essential to maintain survival

Question 5

what are ‘wants’

Answer 5

things that are desired but not essential to survival

Question 6

what are Economic agents

Answer 6

the individuals and firms that partake in economic activity, the demand for supply of goods and services

Question 7

what is a free market economy

Answer 7

firms decide what goods and services to produce with limited intervention from the government

Question 8

how do firms decide what to produce

Answer 8

by looking at the demand for certain goods or services

Question 9

what are the 4 factors of production

Answer 9

-Land
-Labour
-Capital
-Enterprise

Question 10

what is labour

Answer 10

all of the workforce within an economy

Question 11

what is land

Answer 11

encompasses all of the natural resources that come from the earth that are used in the production of goods or services

Question 12

what is capital

Answer 12

the man-made aids that are used in the production process e.g. machinery, tools, factories and offices

Question 13

what is enterprise

Answer 13

the entrepreneur takes land, labour and capital and organises them into order to produce products that will be profitable

Question 14

How is scarcity a problem

Answer 14

there are unlimited wants and finite amount of resources

Question 15

what does scarcity mean

Answer 15

the choices that have to be made about how scarce resources are allocated between different uses

Question 16

what is opportunity cost

Answer 16

can be defined as the benefit lost of the next best alternative when making a choice

Question 17

what’s the use of a Production Possibility Curve (PPC)

Answer 17

used to show different combinations of output for two products e.g. good x and good y given the resources available

Question 18

what is a trade-off

Answer 18

when an economic agent substitutes the production of one good or service for another

Question 19

what are investment goods

Answer 19

those that produce a stream of income in the future e.g. capital goods such as machinery

Question 20

what are consumption good

Answer 20

those that produce a stream of income today e.g. a car for personal use