1.1.1 the economic problem

Question 1

Scarcity

Answer 1

Lack of sufficient products to fulfill total wants/needs

Question 2

The basic economic problem

Answer 2

How to allocate scarce resources to satisfy unlimited needs and wants

Question 3

Needs

Answer 3

Essential to survive (necessities, basic requirement)

Question 4

Wants

Answer 4

Desires (can survive without)

Question 5

What makes something scarce

Answer 5

• Limited in supply
• Alternative uses
• Desirable

Question 6

Opportunity cost

Answer 6

The cost of the next opportunity foregone

Question 7

Production possibility curves (PPC)

Answer 7

Maximum combination of goods and services which can be produced in an economy with existing resources/technology

Question 8

Outward shift of PPC is caused by…

Answer 8

Economic growth
- New tech/resources
- Improved efficiency
- Improved education/training/labour
- Investments

Question 9

Inward shift of PPC is caused by…

Answer 9

• Natural disasters (detrimental changes)
• Destroyed farmland, factories, infrastructure
• Migration of workers

Question 10

Main economic agents

Answer 10

• Individuals/households
• Firms/businesses (private sector)
• Government (public sector)

Question 11

The basic economic questions

Answer 11

• What to produce?
• How to produce it?
• For whom to produce it?

Question 12

Goods

Answer 12

Physical items

Question 13

Services

Answer 13

Non-physical items

Question 14

Capital goods

Answer 14

• purchased by firms
• used to produce other goods (factory machinery, tools, equipment)

Question 15

Consumer goods

Answer 15

• Purchased by households (food/confectionary, cars, furniture)

Question 16

Making choices

Answer 16

Highest value for lowest opportunity cost