1.1 The Economic Problem

Question 1

Basic Economic Problem

Answer 1

The problem of scarcity; wants are limited but resources are finite so choices have to be made

Question 2

Capital

Answer 2

One of the four factors of production; goods which can be used in the production process

Question 3

Economic goods

Answer 3

Goods which have an opportunity cost and suffer from the problem of scarcity.

Question 4

Free goods

Answer 4

Goods with opportunity cost, since there is no scarcity of the good; they are not traded

Question 5

Labour

Answer 5

One of the four factors of production; human capital

Question 6

Land

Answer 6

One of the four factors of production; natural resources such as oil, coal, wheat and physical space

Question 7

Needs

Answer 7

Requirements necessary for an individual to live and function, such as food, water and shelter

Question 8

Normative statements

Answer 8

Subjective statements based on value judgements and opinions; cannot be proven or disproven

Question 9

Positive statements

Answer 9

Objective statements which can be tested with factual evidence to be proven or disproven

Question 10

Rationalisation

Answer 10

Decision-making that leads to economic agents maximising their utility

Question 11

Scarcity

Answer 11

The shortage of resources in relation to the quantity of human wants

Question 12

Wants

Answer 12

Something that people desire to have, but is not a necessity to survive