1.1.3: The Economic Problem

Question 1

What is scarcity?

Answer 1

• refers to when resources are limited/ finite
• the economic problem examines how there are unlimited wants with limited resources

Question 2

What is opportunity cost?

Answer 2

• The loss of the next best alternative when a choice is made

Question 3

What are the 4 factors of production?

Answer 3

• Capital
• Enterprise
• Labour
• Land

Question 4

What are renewable resources?

Answer 4

• resources that can easily be replenished and used again

Question 5

What are non-renewable resources?

Answer 5

• resources that are limited and cannot be replenished/ they take many years to replenish

Question 6

What does capital mean?

Answer 6

• anything that gives it’s owner value or advantage
• usually refers to assets, tools and equipment

Question 7

What does enterprise mean?

Answer 7

• A unit of economic organisation or activity that produces goods and services
• usually involves, starting, planning and running a business

Question 8

What does land mean?

Answer 8

• a place where natural resources are produced

Question 9

• What does labour mean?

Answer 9

• the general body of wage earners who supply, physical, mental and social effort to produce goods and services

Question 10

What are the rewards for each FOP?

Answer 10

• Capital is Interest
• Enterprise is Profit
• Labour is Wages
• Land is Rent