Definitions

Question 1

Factor of production

Answer 1

• Resource inputs
• Available for use in an economy
• For production of goods and services

Question 2

Goods vs services

Answer 2

• Goods are Tangible products

- Services are intangible products

Question 3

Land

Answer 3

natural resources in an economy

Question 4

Labour

Answer 4

The quantity and quality of human resources

Question 5

Capital

Answer 5

Man made aids to production

Question 6

Entrepreneurship

Answer 6

Willingness of an entrepreneur to

• Take risks
• Organise production

Question 7

Factor endowment

Answer 7

• the stock of factors of production

Question 8

Production

Answer 8

the output of goods and services

Question 9

Want

Answer 9

anything you would like

- Irrespective of whether you have the resources and ability to purchase it

Question 10

Scarcity

Answer 10

Situation where is there are

• • Insufficient resources
• To meet all wants

Question 11

Choice

Answer 11

The selection of appropriate alternatives

Question 12

Opportunity cost

Answer 12

The next best alternative foregone.

Question 13

Specialisation

Answer 13

• The concentration by a worker, firms, region or whole economy
• On the production of a narrow range of goods and services

Question 14

Exchange

Answer 14

the process by which goods and services are traded.

Question 15

Benefits of specialisation

Answer 15

1. More output
2. More choice
3. Export led growth/higher income/productive efficiency
4. Higher standard of living by moving away from subsistence

Question 16

Risks of specialisation

Answer 16

1. Unsustainable growth and depletion of resources
2. Deindustrialisation and job losses
3. Risks of a narrow income source
   - Natural disasters destroying a year’s output
   - Changing tastes and fashions
4. Interdependence and so Geopolitics, any unplanned shocks to the system likely to be felt in many other countries .e.g. Asian Tsunami, 9/11.

Question 17

Division of labour

Answer 17

• Specialisation of labour,

- Where the production process is broken down into simpler separate tasks

Question 18

Productivity

Answer 18

output or (production of a good or service), per worker , (per unit time)

Question 19

Economic system

Answer 19

The way in which PRODUCTION IS ORGANISED in a country or countries

Question 20

Market economy

Answer 20

an economic system whereby resources are allocated through market forces of supply and demand

Question 21

Price system

Answer 21

A method of allocating resources by the free movement of prices

Question 22

Command economy

Answer 22

• An economy system whereby most resources are state owned

- And resources are allocated centrally

Question 23

Mixed economy

Answer 23

An economic system

• Where resources are allocated by
• A mixture of market and
• Direct public sector involvement
• Ownership of resources mainly private, but there is some public ownership.

Question 24

Privatisation

Answer 24

The transfer of resources from public ownership to the private sector.

Question 25

Production possibility curve

Answer 25

• This shows the maximum quantities of different combinations of goods which can be produced
• Given current resources
• Given the current state of technology.

Question 26

Developing economy

Answer 26

An economy with a relatively low level of income per head.

Question 27

Developed economy

Answer 27

An economy with a high level of income per head.

Question 28

Tradeoff

Answer 28

the calculation involved in deciding on whether to give up one good for another

Question 29

Give three examples of tradeoffs

Answer 29

Overtime and free-time
Capital investment and consumption
Production of two goods with a limited productive capacity.

Question 30

Factors which cause outward shift in PPF

Answer 30

1. Improved quantity and quality of factors available

2. Technological advances which raise productivity.

Question 31

Economic growth

Answer 31

change in the productive potential of an economy

Question 32

Productive potential

Answer 32

Maximum output which an economy is capable of producing.

Question 33

Productive efficiency

Answer 33

where the average cost of production is minimised