Chapter 1

Question 1

What causes the economic problem of scarcity?

Answer 1

Lack of four factors of production to satisfy everybody’s want.

Question 2

Why do we have the need to choose?

Answer 2

There are not enough goods to satisfy all the wants of population.

Question 3

Why is specialisation very common?

Answer 3

Specialisation is very common now because:

1) Specialised machinery and technology are now widely available.
2) increasing competition means that the business have to keep cost low.
3) most people recognise that higher living standards can be result from being specialisation.

Question 4

What are the advantages and disadvantages of division of labour.

Answer 4

The advantages are:

1) worker are trained in one task and specialise in this task increase efficiency and output.
2) less time is wasted form one workbench to another
3) quicker and cheaper to train workers as fewer skills need to be taught

The disadvantages are:

1) workers can become bored doing one job- efficiency might fall
2) if one worker is absent and no one else can do the job, production will stop.

Question 5

What would life be without business activity?

Answer 5

Unemployed economics, everyone attempts to do everything for themselves, they are self sufficient.

Question 6

Why is added value important?

Answer 6

Added value is important because sales revenue is greater than the cost of material brought in by business.this means the business:

1) can pay other costs
2) maybe able to make profit

Question 7

How a business increase it’s added value?

Answer 7

There are two ways a company can increase the added value:

1) increasing the price and keeping the other cost same.
2) keeping the the price same but decreasing the other cost.

Question 8

What do these term mean:
Added value
Business

Answer 8

Added value is the difference between the selling price of a product and the cost of brought in material and compounds.
Business combine the four factors of production to make products which satisfy peoples wants.

Question 9

There are two types of products. What are they?

Answer 9

Physical goods or services

Question 10

What does this term mean?
Specialisation
Division of labour
Opportunity cost

Answer 10

Specialisation occurs when people and business concentrated on what they are best at.
Division of labour-is when the production process is split up into different tasks.
Opportunity costx the next best alternative.