3.1.1-Economic foundations

Question 1

What are capital goods?

Answer 1

Goods used to run a business and to produce other goods-not consumed in their own right

Question 2

What are consumer goods?

Answer 2

Goods that are wanted because they provide satisfaction to the user

Question 3

What are consumers?

Answer 3

People who purchase goods and services

Question 4

What is consumption?

Answer 4

The use of goods and services

Question 5

Who are entrepreneurs?

Answer 5

Individuals that set up a business and take risks in doing so

Question 6

What are goods?

Answer 6

A product that can be seen or touched i.e. is tangible

Question 7

What are markets?

Answer 7

A place where people can meet to facilitate the transaction of goods (it can be visible or invisible)

Question 8

What are needs?

Answer 8

Requirements for continued existence

Question 9

What is a producer?

Answer 9

A person or a company that produces goods or services for sale

Question 10

What are services?

Answer 10

Products that can’t be seen or touched i.e. is intangible

Question 11

What is an SME?

Answer 11

Small to Medium sized Enterprises

Question 12

What are wants?

Answer 12

The desires that people have that are not necessary for their existence-luxuries

Question 13

What is capital?

Answer 13

Man made goods used in the production process

Question 14

What is enterprise?

Answer 14

The risk and decision making associated with organising factors the other 3 of production in the production process, who

Question 15

What are Factors of Production?

Answer 15

The resources in an economy used to make goods and services-land, labour, capital and enterprise

Question 16

What does finite mean?

Answer 16

Having an end or a limit

Question 17

What is labour?

Answer 17

The human effort (mental and physical) required to produce something

Question 18

What is land?

Answer 18

The natural resources used to produce something

Question 19

Whats is the basic (central) economic problem?

Answer 19

An economy’s finite resources are insufficient to satisfy all human wants and needs

Question 20

What is opportunity cost?

Answer 20

Something we give up when we make a decision-the cost of the next best alternative

Question 21

What are resources?

Answer 21

Services or assets used to produce goods and services that meet human needs and wants

Question 22

What is scarcity?

Answer 22

Limited availability of resources (ones that will run out eventually), not enough to satisfy all wants

Question 23

What is utility?

Answer 23

The benefit gained from consuming a product

Question 24

What are the key economic decisions?

Answer 24

• What to produce
• How to produce
• Who is to benefit from production

Question 25

What is the purpose of economic activity?

Answer 25

The production of goods and services to satsify all needs and wants

Question 26

What are the main economic groups and how do they interact?

Answer 26

• Consumers-demand goods and services from producers
• Producers-supply the goods and services to consumers
• Government-regulates interactions between consumers and producers and provides public goods and services.

Question 27

What are reasons why consumers do not maximise their benefits?

Answer 27

• Cosumers are not always goods at calculating their benefits-imperfect information
• Consumers have habits that are hard to give up (addiction)
• Consumers sometimes copy others’ behaviors

Question 28

What are reasons why producers do not maximise their benefits?

Answer 28

• Producers may wish to maximise sales-by lowering prices and profits firms can increase their market share-this increases monopoly power and can force rivals out of business
• Producers may prioritise caring for customers/wider community
• Producers may complete charitable work