1A - What is economics?

Question 1

What is the overall economic problem?

Answer 1

Human needs are virtually unlimited while the resources required to satisfy them are relatively scarce.

Question 2

For countries

What is the basic economic problem?

Answer 2

All countries must allocate scare resources to produce goods and services in the attempt to satisfy the competing and virtually unlimited wants of consumers.

Question 3

How can resouces be categorised?

CELL

Answer 3

Capital
Entrepreneurship
Land
Labour

Question 4

What is capital ?

Definition in Economics

Answer 4

Man-made goods used in the production process.

Such as machinery, vehicles and industrial buildings that help in producing goods or services

Question 5

How to businesses use capital to remain competitive?

Answer 5

By Investing in capital.

This means that to keep up with competitors, a company must continuously invest in new machinery, technology, and facilities to improve or maintain its efficiency.

Question 6

What is capital stock also known as?

Two further names

Answer 6

Capital accumulation
&
Capital Investment

Question 7

What is capital stock?

Answer 7

The amount of capital goods like factories, roads and technology.

Question 8

When a country increases its capital stock, what is this called?

Two names

Answer 8

Capital accumulation and Capital Investment

Question 9

Why is capital accumulation good important for economic growth?

Also known as capital investment

Answer 9

New capital allows the country to produce more goods and services, which leads to increased productivity.

Productivity = the amount of output per unit of input, such as labor or resources

Question 10

When a country replaces old capital, what does this do to productivity and economic output?

Answer 10

Increases productivity and improves economic output.

Question 11

What is entrepreneurship?

In economic terms

Also known as enterprise

Answer 11

A special kind of labour responsible for risk-taking, innovation, and business organisation.

Question 12

What are entrepreneurs?

In economic terms

Answer 12

The individuals responsible for bringing new ideas to life, organising the resources (factors of production like land, labor, and capital), and bearing the risks involved in production. They play a crucial role in the economy by creating businesses, generating jobs, and driving innovation.

Question 13

Within and outside a corporate function

What are the two kinds of entrepreneurs?

Answer 13

People who set up their own business: bear the risk and take the profits

Innovators within a company: employment replies on devloping sucessful new products or methods of production

Question 14

Entrepreneurship is closely tied to technological progress, why is that?

Answer 14

When entrepreneurs introduce new technologies or methods of production, they help increase the productivity of the workforce.

Increased productivity means that workers can produce more goods and services with the same amount of effort, which leads to higher output (more products) per person.

Question 15

Within an economy, why is increasing productivity important?

Answer 15

When productivity increases, it often leads to higher living standards because the economy can produce more goods, generate more income, and improve overall welfare.

Question 16

What is land?

As a factor of production/in ecconomics

Answer 16

Land refers to all natural resources used in the production process. This includes not only the land surface itself (for agricultural or industrial activities) but also natural resources like minerals, forests, water, oil, and other raw materials.

Question 17

What are the three main types of land?

As a Factor of Production/In Ecconomics

Answer 17

1. Agricultural land: Used for farming and growing food.
2. Sites for production: Areas where factories, offices, or other production activities take place.

3.Natural resources: Raw materials provided by nature (like oil, coal, timber, and water) that are essential in creating goods and services.

Question 18

Why is land important?

As a Factor of Production/In Ecconomics

Answer 18

Natural resources are foundational to producing virtually everything we use, from food to energy to materials for manufacturing.

Question 19

What is Labour?

As a Factor of Production/In Ecconomics

Answer 19

Labour includes all the physical and mental effort contributed by humans in the production of goods and services. This could involve anything from manual work (like farming or construction) to intellectual work (like teaching or managing a business).

Question 20

What does the amount of labour avalible in an economy depend on?

Answer 20

1. The population size
2. The working-age population
3. Number of working-age people who are willing or able to work

Question 21

What is human capital?

Answer 21

A skilled workforce embodies education and training, which contribute to improving productivity (how much output can be produced per worker).

Education and training are sometimes called human capital, reflecting the value that skills and knowledge add to a workforce.

Question 22

What is labour force?

Answer 22

The total number of people who are available to work in an economy.

Question 23

What does a growth in the labour force mean for an economy?

Answer 23

Can lead to economic growth because more people working means more goods and services can be produced.

However it doesn’t always lead to higher living standards unless productivity increases alongside it.

Question 24

What factors influence the labour force growth?

Answer 24

1. Natural population growth
2. International Migration
3. Increased participation rate

Question 25

What are the factors of production?

Answer 25

CELL
(Capital, Entrepreneurship, Land & Labour Resources)

Question 26

What is economic growth?

Answer 26

The increase in a country’s output of goods and services, which leads to an expansion of the country’s productive
capacity.

Question 27

What is the Production Possibility Frontier?

PPF

A graph

Answer 27

Shows how a country can use its limited resources to produce two goods, like food and cloth. The curve shows the maximum possible output if everything is used efficiently. If the country produces more of one good (e.g., food), it has to produce less of the other (e.g., cloth).

Question 28

What is the trade off shown in a PPF graph?

Answer 28

This trade-off is called opportunity cost.

What must be given up in one good to produce more of the other.

Question 29

What is the oppertunity cost?

Answer 29

The cost of a decision to produce more of one good is
measured in terms of the next best forgone alternative.

Question 30

What is captial goods and consumer goods?

Answer 30

• capital goods (used for further production eg to produce other goods or services such as a machine used to make an iPhone)
• consumer goods (used by individuals directly such as an iPhone)

The key difference is that capital goods are used to make other goods, while consumer goods are directly consumed by people.

Question 31

The key economic questiosn all nations face are the what, how and for whom questions, expand on this…

Answer 31

1. What to produce? Nations must choose which goods and services to prioritise based on limited resources.
2. How to produce? Choices involve whether to use labour, land, or capital more intensively, depending on cost and resource availability.
3. For whom to produce? Distribution can be based on income, government policy, or need, with some goods (like medical care) potentially unsuitable for market-based distribution. Different economic systems handle these decisions in varied ways.

Question 32

What are the different categories of economics?

My Labour Is Money In Economics, Ey!

Answer 32

• Managerial economics
• Labour economics
• Industrial economics
• Monetary economics
• International economics
• Environmental economics
• Econometrics

Question 33

What is microeconomics?

Answer 33

Focuses on the “small” parts of the economy, like how individual markets, businesses, and consumers interact. For example, it looks at how demand and supply determine the price of a single product or service (like insurance premiums).

Question 34

What is macroeconomics?

specific markets or sectors

Answer 34

Looks at the economy as a whole, studying large aggregates like total output, unemployment, and inflation. It deals with broad issues like government policy on growth, employment, and stable prices.

overall health and structure of the economy.

Question 35

Within the insurance industry, what insights does microeconomics help with understanding?

Answer 35

How premiums are set (based on risk, competition, and consumer demand). Insurers need to know how market forces affect pricing, what customers are willing to pay, and what competitors are offering.

Question 36

In the insurance industry, how is macroeconomics useful?

Answer 36

An increase in interest rates might affect the investments insurance companies hold or influence how much customers can spend on insurance products.

Question 37

What is positive economics?

Answer 37

• Focuses on objective analysis based on facts.
• Describes what is or what will be without making value judgments.
• Example: “A rise in tax rates will reduce consumer spending.”

Question 38

What is Normative Economics?

Answer 38

• Involves subjective opinions and value judgments about what should happen.
• Focuses on what ought to be.
• Example: “The government should reduce taxes to boost the economy.”

Question 39

What is the key difference between positive and normative economics?

Answer 39

Positive economics is fact-based, while normative economics incorporates personal views and policy recommendations.