1.1 nature of economics - definitions

Question 1

The economic problem

Answer 1

Humans have infinite (unlimited) wants and needs. but only have finite (limited) resources to fulfil them.

Question 2

The factors of Production

Answer 2

Land, Labour, Capital, Enterprise – the resources we use to produce goods and services.

Question 3

Opportunity Cost

Answer 3

The next best alternative forgone.

Question 4

PPF

Answer 4

Shows the maximum level of output of two goods that an economy can make in a certain period of time. Illustrates opportunity cost.

Question 5

Specialisation

Answer 5

When a person, a firm, or even a country, concentrates on producing or doing just one thing.

Question 6

The division of Labour

Answer 6

Production of a complex good or service is broken down into lots of smaller and simpler tasks for different workers or machines.

Question 7

The market

Answer 7

A place where buyers and sellers are brought together to exchange goods and services for a price.

Question 8

Free market economy

Answer 8

All the resources are allocated by the market forces of supply and demand.

Question 9

Centrally planned economy

Answer 9

All the resources are allocated by the government.