Chapter 15 - Intro to Economics

Question 1

What are the factors of production?

Answer 1

These are the elements necessary to produce goods and services

• Land
• Labour
• Capital
• Enterprise

Question 2

Explain the factor of production land

Answer 2

Refers to all natural resources available in a country that can be used to produce goods and services e.g agricultural land, seas, lakes, rivers, mines, forests

Question 3

Explain the factor of production labour

Answer 3

Refers to people available in a country to help produce goods and services and to the qualifications and skills they have

Question 4

Explain the factor of production capital

Answer 4

Refers to all man made things available to help produce goods and services e.g machinery, vehicles, buildings, equipment

Question 5

Explain the factor of production enterprise

Answer 5

The act of bringing together land, labour and capital to set up a business to produce a product or service at a profit

Question 6

Show how each factor of production can be a source of income to the person who provides it

Answer 6

💩 Land yields rent
💩 Labour receives wages
💩 Capital earns interest
💩 Enterprise makes a profit (or loss)

Question 7

What is economic system?

Answer 7

The way a country uses the factors of production to produce goods and services

Question 8

What are the three main types of economic systems?

Answer 8

⚡️ Centrally planned economy
⚡️ Free enterprise economy
⚡️ Mixed economy

Question 9

Explain a centrally planned economy and give an example

Answer 9

The government makes all the decisions about the production of goods and services e.g Cuba and Iran

Question 10

Explain a free enterprise economy and give an example

Answer 10

Citizens are free to make all the decisions about the production of goods and services (within the law) e.g USA

Question 11

Explain a mixed economy and give an example

Answer 11

A combination of centrally controlled economy and free enterprise economy e.g Ireland

Question 12

What is economics?

Answer 12

The study of how people, businesses and governments with a limited income make decisions about what they spend their money on

Question 13

What is economic growth?

Answer 13

Refers to the change in quantity of goods and services produced in a country from one year to the next

Question 14

What is the total amount of goods and services produced in a year referred to as?

Answer 14

Gross National Product (GNP)

Question 15

How do you calculate economic growth?

Answer 15

Change in value of goods 100
————————————- X ——
Value of goods in year 1 1

Question 16

What are the benefits of economic growth?

Answer 16

• New jobs
• People enjoy a higher standard of living
• More money available

Question 17

How do you achieve positive economic growth?

Answer 17

• Keep inflation low
• Interest rates are low
• Wage increase and other costs are kept low
• Government budgets well and reduces their borrowing

Question 18

What is inflation?

Answer 18

A general rise in the cost of living from one period to another (increase in price)

Question 19

How do you calculate inflation?

Answer 19

Increase in the cost of living 100
—————————————- X ——
Cost of living in year 1 1

Question 20

What are the causes of inflation?

Answer 20

• Increase in cost of producing goods
• Supply and demand
• Price of oil has increased

Question 21

What are the benefits of low inflation?

Answer 21

►People have more money to spend
►New jobs created
►Irish firms become more profitable
►Government receives more money from taxation
►Irish goods will be cheaper to produce

Question 22

What are the dangers of high inflation?

Answer 22

◄Irish goods will be more expensive to produce

◄Jobs lost

Question 23

What is the CPI?

Answer 23

The Consumer Price Index→It would be too difficult to look at the price of every product and service available on sale in Ireland to calculate inflation. Therefore a selection of goods is selected and this selection is called the Consumer Price Index