Chapter 3

Question 1

What is a household ?

Answer 1

all of the people who live together and make joint economic decisions or who are subjected to others who make such decisions for them

Question 2

What is aggregate consumption expenditure/ total consumption?

Answer 2

The total spending of all households and consumer goods and services

Question 3

What are the sources of production ?

Answer 3

• Capital
• Entrepreneurship
• Natural resources
• Labour

and

• Technology
• Choice of technique

Question 4

What are natural resources in sources of production and what is the source of income ?

Answer 4

Natural resources consists of all the gifts of nature

~ Income = Rent

Question 5

What is labour as a source of production and what is its source of income ?

Answer 5

Labour is the excercise of human mental and physical effort in the production of goods and services

~ Income = Wages and salaries

Question 6

What is Capital as a source of production and what is its source of income ?

Answer 6

Anything is used in the production of other goods
It comprises of all manufactured resources

~ Income = Interest

Question 7

What is entrepreneurship as a source of production and what is its source of income ?

Answer 7

Entrepreneurship is the combination and organization of the factors of production by a people who see opportunities and are willing to take risks by producing goods with the expectation that they will be sold

~ Income = Profit

Question 8

What is invention ?

Answer 8

The discovery of new knowledge

Question 9

What is innovation?

Answer 9

The incorporation of new knowledge into actual production techniques and products

Question 10

What is the basic desicion-making unit in an economy?

Answer 10

Households

Question 11

What are the basic productive units in an economy?

Answer 11

Firms