Basic Economic Problem

Question 1

What is an economic agent

Answer 1

Any individual, firm,government or organisation that makes and economic decision

Question 2

What is meant by scarcity

Answer 2

All of the world’s resources are limited. Economic agents can only obtain a limited amount at any time and therefore have to make choices about how they are used.

Question 3

What does depletion mean

Answer 3

Using up of scare resources

Question 4

What does degradation mean

Answer 4

Reducing the value of something

Question 5

Why should we be concerned about depletion

Answer 5

Eventually there will be very little or nothing of some resources so we will have to look at other methods or resources

Question 6

Why should be worried about degradation

Answer 6

Satisfaction levels would be decreased (value of house decreases by 24% when in walking distance of maccies)

Question 7

What is a need

Answer 7

Basic necessities that you need to live

Question 8

What is a want

Answer 8

Something that you like to had but you can live without

Question 9

Why is it important to distinguish between needs and wants

Answer 9

So that you are able to priorities

Question 10

What is an economic system

Answer 10

A way of dealing with an economic problem

Question 11

What is a mixed economy

Answer 11

A mixture of a free market economy ( things are provided for my private individuals ) and a command economy ( things are provided by the government )

Question 12

What is the purpose of economic activity

Answer 12

The production of goods and services to satisfy needs and wants ,to improve the standard of living.

Question 13

What is meant by opportunity cost

Answer 13

The cost in terms of the alternative good which is foregone ( if we go to the cinema the opportunity cost is that we can’t go out for tea)

Question 14

What is meant by a free good

Answer 14

A good for which there is no opportunity cost

Question 15

What is an example of a free good and in what circumstance might it not be classed as a free good

Answer 15

-Fresh water and sea water
-air ( air tanks that divers use )

Question 16

Which three key questions need to be addressed to attempt to solve the basic economic problem

Answer 16

1. What? To produce
2. How? To produce
3. For whom? Should we produce it for

Question 17

What are the four factors of production

Answer 17

Land labour capital and enterprise

Question 18

What does land mean as a factor of production

Answer 18

It includes the natural resources on the earth, below the earth, in the sea , in the rivers and in the atmosphere. Some of these resources are renewable and others are non-renewable

Question 19

What does labour mean as a factor of production

Answer 19

It is the human factor of production and each ores in in a workforce is a unit of labour. Labour can be valued in terms of its human capital and this can be improved by education and training.

Question 20

What does capital mean as a factor of production

Answer 20

It’s the stock of manufactured tools and are used in production to produce other tools . ‘Social capital’ includes roads and other pieces of infrastructure.

Question 21

What does enterprise/entrepreneurs mean as a factor of production

Answer 21

A unit of labour that takes risk. They also organise production and take risks using their own and the financial capital of other to produce goods and/or a service. They aim to make a profit.

Question 22

What are the economic objectives of individuals

Answer 22

Utility/ satisfaction maximised

Question 23

What are the economic objectives of firms

Answer 23

• they want to maximise profits
  -growth
  -social objectives
  -out do rivals

Question 24

What are the economic objectives of governments

Answer 24

-quality of life
-make people happy
-gain popularity
-maximise citizens welfare /well-being

Question 25

What is a positive statement

Answer 25

It can be tested and it’s possible to provide facts to disprove them and they don’t contain judgements.
“All swans are white” id a positive statement

Question 26

What is a normative statement

Answer 26

It includes an opinion or value judgement and can’t be tested.
“Charging students tuition fees is wrong “ is a normative statement