Econ 1 - Intro

Question 1

Basic Economic Principles

Answer 1

to produce goods and services to provide what we need and want.

Question 2

The Fundamental Economic Problem

Answer 2

There are infinite wants and yet limited resources.

Question 3

Opportunity Cost

Answer 3

Decide on the best way to allocate resources in order to get maximum benefit.

Question 4

Economic Resources

Answer 4

Capital - equipment used
Enterprise - risk takers
Land - minerals and land itself
Labour - potential workforce

Question 5

Consumers objectives

Answer 5

Maximise own well-being

Question 6

Workers objectives

Answer 6

Maximise gains from working. e.g. higher wages and better working condition.

Question 7

Firms objectives

Answer 7

Maximise profits

Question 8

Government objectives

Answer 8

Government acts in the people best interests.

Question 9

Incentive function

Answer 9

To pursue a course of action or to change their behaviour. e.g. higher prices give producers higher incentives.

Question 10

Signalling function

Answer 10

change according to when resources are needed and when they are not. e.g. if demand is low, which means lower prices then this is a signal to produce less.

Question 11

Rationalling function

Answer 11

ration scarce resources when demand does not equal supply. e.g. when demand is greater than supply and there is excess demand, price goes up.

Question 12

Normative statement

Answer 12

Opinions that require a value judgement to be made.

Question 13

Positive Statement

Answer 13

Can be tested against facts