Definitions

Question 1

Economic good

Answer 1

A good with an opportunity cost

Question 2

Free good

Answer 2

A good with no opportunity cost

Question 3

Basic economic problem

Answer 3

Scarcity. Unlimited wants in the face of limited resources therefore a choice has to be made on how to allocate these scarce resources (what how for whom)

Question 4

Normative statement

Answer 4

Subjective. Contains a value judgment

Question 5

Positive statement

Answer 5

Objective. Can be tested by referring to available evidence

Question 6

Needs

Answer 6

Essential to sustain life

Question 7

Wants

Answer 7

People would like to consume

Question 8

Scarcity

Answer 8

Unlimited wants in the face of limited resources

Question 9

Factors of production

Answer 9

Land
Labour
Capital
Enterprise

Question 10

Market

Answer 10

Where buyers and seller meet in order to exchange goods and services

Question 11

Market economy

Answer 11

Exists where the market decides what is produced, how it’s produces and for whom it’s produced

Question 12

Opportunity cost

Answer 12

Benefits forgone of the next best alternative when a choice is made

Question 13

Trade-off

Answer 13

When you have a choice between two conflicting objectives because you can’t achieve all your objectives at the same time (compromise)

Question 14

Productive possibility curve PPC

Answer 14

Shows maximum quantities of different combinations of output of two products with currency resources and technology

Question 15

Choice

Answer 15

Deciding what to produce, how to produce and who to produce for

Question 16

Productive efficiency

Answer 16

Production of goods and services by firms is achieved at the lowest possible average total cost (technical + cost efficient)

Question 17

Specialisation

Answer 17

Concentration by a worker/firm/market/economy on a narrow range of goods and services

Question 18

Division of labour

Answer 18

Breaking down production processes into a series of small processes

Question 19

Trade

Answer 19

Buying and selling goods and services from other countries that they can’t make

Question 20

Money

Answer 20

Anything that is widely accepted in exchange for goods and services

Question 21

Barter

Answer 21

The exchange of goods and services for other goods and services (requires double coincidence of wants)