1.1 – Basic Economic Problem: Choice and the Allocation of Resources

Question 1

What is economics?

Answer 1

The social science that describes the factors that determine the production, distribution and consumption of goods and services.

Question 2

What is The Basic Economic Problem?

Answer 2

There are finite resources and unlimited wants.

Question 3

What are the factors of production?

Answer 3

Land
Labour
Capital
Enterprise

Question 4

What is Land?

Answer 4

All natural resources in an economy. This includes the surface of the earth, lakes, rivers, forests, mineral deposits, climate etc. Rewarded with rent

Question 5

What is Labour?

Answer 5

All the human resources available in an economy. That is, the mental and physical efforts and skills of workers/labourers. Rewarded with Wages/Salaries

Question 6

What is Capital?

Answer 6

All the man-made resources available in an economy. All man-made goods (which help to produce other goods-capital goods) from a simple spade to a complex car assembly plant are included in this. Rewarded with interest.

Question 7

What is Enterprise

Answer 7

The ability to take risks and run a business venture or firm is called enterprise. A person who has enterprise is called an entrepreneur. In short they are the people who start a business. Rewarded with profit from business

Question 8

What is Opportunity Cost?

Answer 8

the next best alternative that is sacrificed/forgone in order to satisfy the other.

Question 9

What are Production Possibility Curves (PPC)?

Answer 9

the maximum combination of two goods that can be produced by an economy with all the available resources.