Chapter 1

Question 1

What are economic goods

Answer 1

Goods that are scarce, there are a limited amount of them

Question 2

What are free goods

Answer 2

goods that are not normally regarded as being scarce, such as the atmosphere

Question 3

Positive statements

Answer 3

A statement about what is, such as facts

Question 4

Normative statements

Answer 4

A value judgement, about what ought to be. Opinion based

Question 5

What is the basic economic problem

Answer 5

There is unlimited wants but limited resources

Question 6

What are the factors of production

Answer 6

CELL - Capital, Enterprise, Land and Labour

Question 7

What is opportunity cost

Answer 7

When making a decision, the value of the next best alternative to your choice. If you choose coke then the opportunity cost might be Pepsi. The value of the next best alternative forgone

Question 8

What is a trade-off?

Answer 8

A trade-off, the choice of one alternative requires a sacrifice of another

Question 9

What shifts the demand curve?

Answer 9

Advertising, population size, trends, change in income, prices of other goods (complementary and competitive) and legislation

Question 10

Examples of Labour in the factors of production

Answer 10

Labour is a human resource, these humans have different skill sets/levels

Question 11

Examples of Capital in the factors of production

Answer 11

These are non-human resources, such as: Machinery, Transport, equipment and factory buildings

Question 12

Examples of Enterprise in the factors of production

Answer 12

This is another human resource, an entrepreneur. Someone who organises production and identifies projects to be undertaken and bearing the risk of the activity. This

Question 13

Examples of Land in the factors of production

Answer 13

Fields, forests etc, raw resources provided by mother nature

Question 14

What does PPC stand for

Answer 14

Production possibility curve

Question 15

What is a PPC

Answer 15

A curve showing the maximum combinations of goods or services that can be produced in a set period of time, given the available resources. It provides information about the opportunity cost

Question 16

What type of line is a PPC

Answer 16

A curve

Question 17

What are capital goods

Answer 17

Goods used in part of the production process such as machinery or factory buildings

Question 18

What are consumer goods

Answer 18

Goods used for present use (consumption)

Question 19

What do capital goods do in the long term

Answer 19

They increase future capacity in the economy, and expenditure on these goods is known as investment

Question 20

Shifts in PPC and how that happens

Answer 20

There are shifts in PPC over a period of time due to capital goods being produced, as there are more resources available for production

Question 21

What does a point outside the PPC represent

Answer 21

Producing at that level is not attainable yet with the current resources

Question 22

Is opportunity cost a useful concept

Answer 22

Opportunity cost links to future events so it’s hard to place a value on
Alternatives are not always easy to quantify as they can both provide benefits and costs.

Question 23

Moving along a PPC and what that means

Answer 23

It uses the same number of state resources but for different goods, for example more capital goods than consumer goods.