Basic economic concepts

Question 1

Economics

Answer 1

social science that studies how society behaves in meeting their unlimited needs and wants to be faced with limited resources

Question 2

Micro-Economics

Answer 2

Study of the behavior and decisions of individual participants in the economy. Includes how prices are determined

Question 3

Macro economics

Answer 3

Study of the sum of economic activity inclusive of regional , national and int. study fields

Question 4

Equitability

Answer 4

Being fair on the allocation of economic resources

Question 5

Opportunity cost

Answer 5

Value of the next best alternative. The cost of making choices

Question 6

Ceteris paribus

Answer 6

all other things being equal

Question 7

Normative statement

Answer 7

economic statement based on individual opinion

Question 8

Positive Statement

Answer 8

economic statement that is objective and can be tested

Question 9

Scarcity

Answer 9

when we have limited economic resources and unlimited needs and wants

Question 10

Absolute scarcity

Answer 10

when it is no economic resource to meet needs and wants

Question 11

Relative scarcity

Answer 11

when the available resource has more than one use at the same time

Question 12

Choice

Answer 12

Doing one activity and not another

Question 13

Price theory

Answer 13

looks on how prices can be formed by means of market forces

Question 14

Efficiency

Answer 14

Where economic resource is best allocated and put to their productive use

Question 15

what is the economic problem?

Answer 15

Once people’s needs are met they have endless wants which cannot be satisfied due to limited resources

Question 16

Economy

Answer 16

Area in which people manufacture or produce goods and services

Question 17

4 factors of production

Answer 17

Land
Labour
Capital
Entrepreneurship

Question 18

4 Economic systems (explain)

Answer 18

Traditional economy (hierarchy determines the allocation of resources)
Command economy (Authorities decide on the production and allocation of resources. Allocated according to the gov. plan)
Market economy (Private ownership is important. Market place and individual choice determine the production and distribution of products)
Mixed economy (Combo of market and command. SA a good example)

Question 19

economic elements 4

Answer 19

Scarcity
Choice
Efficiency
Equitability

Question 20

6 Branches of economics

Answer 20

Monetary economics
International Economics
Public Sector Economics
Development economics
Labor economics
Environmental economics
Regional economics

Question 21

Monetary economics

Answer 21

Study of money. Looks at how money is controlled and how it is used as a product in the exchange process

Question 22

International Economics

Answer 22

The study of international trade and finance

Question 23

Public sector economics

Answer 23

Pays attention to decisions and policies made by a country’s government. Also considers government income budget and expenditure.

Question 24

Development economics

Answer 24

focuses on strategies and policies that help countries develop and grow

Question 25

Labour economics

Answer 25

Studies the demand and supply of labor and its effects on the economy of a country

Question 26

Environmental economics

Answer 26

Looks at issues that affect the environment

Question 27

Regional economics

Answer 27

The study of certain geographical regions in a country responsible for the production of goods and services

Question 28

Approaches to economics breaks the study down into…(2)

Answer 28

Micro and macroeconomics

Question 29

Micro and Macroeconomics

Answer 29

Micro- looks at individual decisions. Considers individuals’ demand a product at a certain price.

Macro- Study of the economy as a whole and deals with issues like unemployment, Inflation, Growth, Monetary and fiscal policy.

Question 30

Economic model

Answer 30

An attempt to explain or predict how a set of circumstances will behave if a variable changes

Question 31

Positive Statement

Answer 31

deals in facts. It can be proved/disproved by looking at the facts

Question 32

Normative Statement

Answer 32

Deals with opinions on what ought to be. They can be debated or argued but cant be settled with facts.

Question 33

Empirical science

Answer 33

Creates explanations by interpreting data from past events and experiences rather than from thinking

Question 34

The Scientific method

Answer 34

They formulate a question
They conduct an investigation
They draw a conclusion

This process is known as deduction

Question 35

Difficulties faced by economics (6)

Answer 35

• People all think and behave differently
• It is difficult to run a controlled test to see how people will react to change
• It is difficult to change one variable and keep others constant
• Economists are often biased and disagree
• Results are less precise than in physical science
• Economic laws are more like statements than laws, they are not exact.

Question 36

Model

Answer 36

A practical way of making theories more concrete in a verbal or mathematical description

Question 37

Theory

Answer 37

A generalization. A broad statement based on a specific set of data

Question 38

economics has most in common with (4)

Answer 38

Accounting
Business studies
commercial law
mathematics of finance

Question 39

Career opportunities using economics can be found in (7)

Answer 39

Statistics
Mathematics
Information technology
Law
Politics
Sociology
Geography

Question 40

Difference between absolute and relative scarcity

Answer 40

Absolute-People have the means to buy the product but there is not enough of the product to buy

Relative- More than enough of the product available but not enough resources available to purchase them.

Question 41

Free goods

Answer 41

things that are plentiful and have no price. everyone has access to them.

Question 42

Economic goods

Answer 42

goods produced from scarce resources and for which there are costs and a final price. Have exchange value as people are prepared to pay for them.

Question 42

Economic goods

Answer 42

goods produced from scarce resources and for which there are costs and a final price. Have exchange value as people are prepared to pay for them.

Question 43

Economic principal of opportunity cost

Answer 43

when we have a choice to make, economists measure the cost of the thing chosen in terms of the cost of the alternative that has been given up. This is called opportunity cost

Question 44

welfare and prosperity of a country depends largely on what

Answer 44

The volume of production within it

Question 45

Production

Answer 45

The process whereby an entrepreneur combines available resources and turns them into some sort of product that is used to satisfy the wants and needs of the population

Question 46

Direct production

Answer 46

When the producer and consumer are the same

Question 47

Indirect production

Answer 47

producer and consumer are different.

Question 48

Specialization and division are seen as tools to solve what

Answer 48

the scarcity problem

Question 49

Specialization

Answer 49

When a business specializes in the production of one product

Question 50

Division of labour

Answer 50

when each worker specializes in doing a particular job

Question 51

Globalization

Answer 51

The result from world specialization igniting international trade and commerce

Question 52

Capital intensive production

Answer 52

Use more machinery than workers

Question 53

Labour intensive production

Answer 53

Lots of workers and not much machinery

Question 54

immediate consumption

Answer 54

when a product is used up or destroyed when an individual uses it

Question 55

Deferred consumption

Answer 55

when you buy product that can be used over and over to satisfy your needs

Question 56

Exchange

Answer 56

processes also known as trade and found in markets

Question 57

4 types of markets

Answer 57

wholesailers
retailers
service market
international market