Basics Of Economics

Question 1

What is Economics?

Answer 1

Economics is the study of how people manage resources.

Question 2

What is micro economics?

Answer 2

Economics of individuals, businesses and markets

Question 3

What is macro economics?

Answer 3

Economics of governments, countries and global economy

Question 4

What is the Economic Problem?

Answer 4

We have unlimited wants and needs but limited resources.

Therefore decisions have to be made upon the allocation of resources we have.

Question 5

What 3 questions are asked to fulfil the Economic Problem?

Answer 5

What should be produced?
How should it be produced?
Who should benefit from what is produced?

Question 6

What is a want?

Answer 6

A want is something that will bring you benefit but you don’t have to have it

Question 7

What is a need?

Answer 7

A need is something necessary - you have to have it for survival

Question 8

What is the consumers want?

Answer 8

Higher standard of living

Question 9

What is the producers want?

Answer 9

Profit maximisation

Question 10

What are the governments wants?

Answer 10

Positive and stable economic growth
Low unemployment
Low inflation
Balanced balance of payments

Question 11

What are the 4 factors of production?

Answer 11

Capital
Enterprise
Land
Labour

Question 12

What is Capital?

Answer 12

Man-made resources used in production

Question 13

What is Enterprise?

Answer 13

Skills and abilities of a person to make a business successful

Question 14

What is Land?

Answer 14

Natural resources used in production

Question 15

What is Labour?

Answer 15

Workforce

Question 16

What is the reward if Capital?

Answer 16

Interest

Question 17

What is the reward of Enterprise?

Answer 17

Profit

Question 18

What is the reward of Land?

Answer 18

Rent

Question 19

What is the reward of Labour?

Answer 19

Wages

Question 20

How are economic decisions made?

Answer 20

Weighing up costs and benefits.
Money
Time
Resources
Environment
Etc
In economics costs and benefits are translated into a financial measure

Question 21

What is Opportunity Cost?

Answer 21

“The next best alternative forgone”

To do something with the resources we have, we must give up our second choice

In this we discount any benefit from second option.
Economic benefit is what we get and beyond that.

Question 22

Give example of opportunity cost?

Answer 22

The benefit of what you would have gained from second best good.

Question 23

If deciding between a car and a phone and you choose the car, what is the opportunity cost?

Answer 23

The benefit you would have gotten from the phone

Question 24

What are the 3 industry sectors?

Answer 24

Primary
Secondary
Tertiary

Question 25

What is the Primary Industry Sector?

Answer 25

Business involved in extracting natural resources
E.g. fisherman

Question 26

What is the Secondary Industry Sector?

Answer 26

Businesses involved in turning raw materials into a finished good (manufacturing)
E.g. factory worker

Question 27

What is the Tertiary Industry Sector?

Answer 27

Businesses involved in providing a service rather than a good or sells a good in the retail sector
E.g. teacher

Question 28

What is specialisation?

Answer 28

Specialisation (division of Labour) is when a production process is split into small tasks and each worker does one task over and over.

Question 29

What are the benefits of specialisation?

Answer 29

Lower average costs
Make more profit
Get better at a particular job
Prices cheaper - more available
Quality higher

Question 30

What are the drawbacks of Specialisation?

Answer 30

Lower motivation
Hard to cover for people ill or off
People lose diverse skills and find it hard to get different jobs