1.1.3 Scarcity

Question 1

Define basic economic problem

Answer 1

when there are scare, finite resources relative to infinite wants/needs leading to choices to be made on efficient resource allocation

Question 2

Define scarcity

Answer 2

the demand for a good or service is greater than the availability of the good or service

Question 3

Explain opportunity cost linked with scarcity

Answer 3

because of scarcity, choices have to be made about resource allocation. This leads to an opportunity cost

Question 4

Define free good

Answer 4

goods of which their quantities are enough to satisfy all people’s wants for them

Question 5

Qualities of free goods

Answer 5

• no one is willing to pay for them
• no one wants more of them
• does not require resources to make → no opportunity cost → no market price

Question 6

Define economic goods

Answer 6

goods of which their quantities are not enough to satisfy all people’s wants

Question 7

Qualities of economic goods

Answer 7

• consumers are willing to pay for
• consumers want more of
• requires resources → has opportunity cost → has a market price

Question 8

Define renewable resources

Answer 8

resources that can be exploited over and over as they have potential to renew themselves
eg: solar, hydro, wind

Question 9

Define non-renewable resources

Answer 9

resources that can’t be replaced once exploited
eg: natural gas, nuclear energy, coal

Question 10

Define factors of production

Answer 10

inputs to the production process
Land, Labor, Capital, Enterprise

Question 11

Define land & reward for land

Answer 11

natural resources

reward - rent

Question 12

Define labor & reward for labor

Answer 12

workers used in production - amount of physical, mental, social effort used in production

reward - wage

Question 13

Define capital & reward for capital

Answer 13

stock of manufactured resources in production

reward - interest

Question 14

Define working capital

Answer 14

stock of raw materials & unfinished goods waiting to be manufactured and sold to consumer

Question 15

Define fixed capital

Answer 15

used to transform working capital into finished goods

Question 16

Define enterprise & reward for enterprise

Answer 16

seeking out profitable opportunities for production and taking risks in attempting to exploit these

reward - profit

Question 17

Define Capital Good

Answer 17

Man made resources that are used to produce both consumer and other capital goods