BASIC ECONOMIC PROBLEM

Question 1

Define Normative statement

Examples

Answer 1

Statement containing a value judgement, cannot be disproven

Opinion, statement, comment

Question 2

Define Positive statement

Answer 2

Statement that can be scientifically tested and disproven

Fact, statistic

Question 3

How do value judgements influence economic decision making and policy

Answer 3

Use normative statements knowing political opponents + media will seize argument

Question 4

Purpose of economic activity

Answer 4

Production of goods and services to satisfy the populations unlimited needs and wants

Question 5

What is a need

Answer 5

Neccessity people must have in order to survive

Question 6

What is a want

Answer 6

Luxury, a desirable good that isn’t essential

Question 7

Define economic welfare

Answer 7

The overall well-being of an individual or group within an economy

Question 8

Economic system

Answer 8

Set of institutions within a community deciding how and for who to produce

Question 9

List 3 types of economy

2 word descriptions

Answer 9

Market- price mechanism
Command- planned allocation
Mixed- public + private

Question 10

Define production

Answer 10

Process converting factor inputs into goods and services

Question 11

Define capital good

Examples

Answer 11

Producer good, used in the manufacturing process

Factories, technology

Question 12

Define consumer good

Examples

Answer 12

A good consumed by households to satisfy their needs and wants

Food, clothes, drink

Question 13

List 4 factors of production

Answer 13

Land
Labour
Capital
Enterprise

Question 14

List 2 types of resources

Answer 14

Renewable- regenerative material
Non-renewable- finite supply

Question 15

Basic economic problem

Answer 15

How best to make decisions about the allocation of scarce resources among competing uses in order to improve and maxi ise happiness and welfare

Question 16

Scarcity

Answer 16

Unlimited wants with only limited resources to meet them. People want to consume more than the economy can produce.

Question 17

Choice

Answer 17

The difference in decision regarding the use of scarce resources

Question 18

Oportunity cost

Answer 18

Cost of forgoing the next best alternative

Question 19

Production Possibilty Frontier

Answer 19

Curve displaying all possible combinations of 2 products that can be produced when resources are fully delployed

Question 20

Define technical progress

Answer 20

Refers to the discovery of new and improved methods of producing goods

Question 21

Points on the PPF

Answer 21

ON- full employment, productively efficient
OFF- unemployment, productively inefficient
In front- not yet attainable, long run growth needed

Question 22

Define full employment

Answer 22

When all capital inputs that are willing and able to be employed are

Question 23

Define unemployment

Answer 23

When not all factors willing and able to work are employed

Question 24

Define resource allocation

Answer 24

Process where availible factors of production are assigned

Question 25

Define productive efficiency

Answer 25

When it is impossible to produce more of one good without producing less of another, occurs for firms when avg toal cost is minimised