chapter 1- the economic problem

Question 1

definition of the basic economic problem

Answer 1

the basic economic problem is concerned with how best to allocate scarce resources in order to satisfy people’s unlimited needs and wants

Question 2

definition of economic agents

Answer 2

are households, firms that operate in the private sector of an economy and the government

Question 3

definition of public sector

Answer 3

refers to economic activity directly involving the government, such as the provision of state education and healthcare services. the public sector’s main aim is to provide a service.

Question 4

definition of needs

Answer 4

goods and services that are essential for survival

Question 5

definition of private sector

Answer 5

refers to the economic activity of private individuals and firms. the private sector’s main aim is to earn profit for its owners

Question 6

definition of goods

Answer 6

physical items such as tables

Question 7

definition of services

Answer 7

non physical items such as haircuts

Question 8

definition of economic goods

Answer 8

goods that are limited in supply

Question 9

definition of wants

Answer 9

goods and services that are not necessary for survival but are demanded by the economic agents to fulfil their desires

Question 10

definition of free goods

Answer 10

goods that are unlimited in supply. such as air and seawater. hence there is no opportunity cost in terms of their output