Economic Definitions

Question 1

What is the definition of “Needs vs. Wants”?

Answer 1

Needs are basic goods for survival like water, food, clothing and, shelter

Whereas…

Wants are goods which are not for survival such as a IPhone or Television.

Question 2

What is the definition of “Free goods”?

Answer 2

Free goods don’t have a opportunity cost like air and, sea water and are found in abundance and you don’t have to pay for them

Question 3

What is the definition of “Economic Goods”?

Answer 3

Economic goods are goods that have opportunity cost, so individuals have to pay for them

Question 4

What is “Economic Welfare”?

Answer 4

An individual or a group of people and their level of prosperity and their living standards

Question 5

What is the “Production process”?

Answer 5

Converting inputs into outputs

Question 6

What are the “resources/factor of production”?

Answer 6

Resources used to manufacture products such as land, labour, capital and, enterprise

Question 7

What is the definition of “capital good”?

Answer 7

A capital good is a good which can be used to make a multiple of other consumer goods such as machinery

Question 8

What is the definition of “consumer good”?

Answer 8

Consumer goods are goods for final consumption and are not resold

Question 9

What is the definition of “population growth”?

Answer 9

Population growth is when there are more people in the U.K. due to either immigration or babies being born and people are living longer so this should move the PPF curve outwards.

Question 10

What is the “discovery of new resources”?

Answer 10

Discovery of new resources such as shell gas through fracking will increase production and shift the PPF outwards.

Question 11

What is “allocative efficiency”?

Answer 11

When a firm produces goods at the price a customer is willing to pay which is P=Mc, ({P means price} and [Mc means Marginal cost]).

Question 12

What is an “economy”?

Answer 12

The economy in simple words can be referred to a geographical area in terms of production and consumption of goods and services

Question 13

What is a “free market economy”?

Answer 13

A free market is a system in which the prices for goods and services are determined by supply & demand with little to no government intervention like the America

Question 14

What is a “planned economy”?

Answer 14

A economy where the government decide what to produce and when to produce, so a communist-style government like North Korea

Question 15

What is a “mixed economy”?

Answer 15

When a free market economy and a planned economy is both present within a economy.

Question 16

What are the “sectors of the economy”? (Give definitions of each sector)

Answer 16

Primary sector - extraction of raw materials

Secondary sector- concerned with producing finished goods and/or services

Tertiary sector - concerned with offering intangible good and services to customers

Question 17

What is the definition of “markets”?

Answer 17

One of the many varieties of systems, institutions, procedures, social relations and infrastructures whereby both parties engage in exchange.

Question 18

What is the definition of “inflation”?

Answer 18

A increase in prices of products making the currency less valuable i.e. after ww2 when the German currency was worthless.

Question 19

What is meant by “demand pull inflation”?

Answer 19

This is asserted to arise when aggravated demand in an economy outpaces aggravated supply. It involves inflation rising as real gross domestic product (GDP) rises and unemployment falls.

Question 20

What is “cost push inflation”?

Answer 20

Cost push inflation is inflation caused by an increase in prices of input like labour, raw materials ect. The increased price of the factors of production leads to a decreased supply of these goods.

Question 21

What is the definition of “nominal and real values”?

Answer 21

Nominal and real values are adjusted for inflation.

The real value is obtained by removing the effect of price levels changes from the nominal value of time - series data, so as to obtain a truer picture of economic trends.

Question 22

What is the “Consumer Price Index (CPI)”?

Answer 22

An index of the variation in prices for retail goods and other items. Use geometric formula to calculate the average prices but this does not include housing cost.

Question 23

What is the “Retail Price Index (RPI)”?

Answer 23

An measurement of inflation published monthly by the office for National Statistics -

It measures the change in the cost of a representative sample of retail goods and services.

Question 24

What is the “labour force survey”?

Answer 24

Statistical surveys conducted in a number of countries designed to capture data about the labour market. All European Union member states are required to conduct a labour force survey annually.

Question 25

What is a “claimant count”?

Answer 25

An economic indicator for the United Kingdom that measures unemployment -

This is provided by the United Kingdom’s Office of National Statistics (ONS), the Claimenr Count measures the number of people seeking unemployment benefits while they are seeking work.

Question 26

What is a “Production Possibility Frontier”?

Answer 26

A production possibility frontier is the different combination of goods and services an economy can produce with the given amount of factors of production at a given point of time

Question 27

What is a “PPF curve”?

Answer 27

A PPF curve shows the different combination of goods and services that can be produced with the given amount of resources at a point of time

Question 28

What is the “opportunity cost”?

Answer 28

The next best alternative forgone - for example you choose an Xbox over a PlayStation, this means the PlayStation becomes the opportunity cost as money is now a scarce resource.

Question 29

What is a “Straight Line PPF Curve”?

Answer 29

A straight line PPF Curve means opportunity cost is constant as factors of production are perfectly substitutable amongst themselves.

Question 30

What is a “Concave PPF Curve”?

Answer 30

A concave PPF curve means the opportunity cost is always changing as the factors of production are not perfectly substitutable amongst themselves.

Question 31

What is “Economic growth”?

Answer 31

Economic growth is when the economy grows in real GDP which would cause the PPF line to move outwards.

Question 32

What is “full employment”?

Answer 32

When all factors of production are fully employed and the economy is operating on the PPF curve we call it full employment.

Question 33

What is meant by “unemployment”?

Answer 33

This is when people who are looking for jobs at the going market wage rate cannot find a job. The economy is producing inside the PFF curve as resources are lying idle.

Question 34

What is meant by “productively efficient”?

Answer 34

The economy is productively efficient when they are working on the PPF curve.

Question 35

What is meant by “labour productivity”?

Answer 35

Labour productivity is the output per worker and when the labour productivity increases the PPF shifts outwards also when the labour productivity decreases the PPF curve shifts inwards.

Question 36

What is meant by “capital productivity”?

Answer 36

Capital productivity is the output per machine and when the capital productivity increases the PPF shifts outwards also when the capital productivity decreases the PPF shifts inwards.

Question 37

What is the economic definition of “technology”?

Answer 37

Technology is the application of scientific knowledge in production. Technology changes in a period of time which intern increases the output and shifts the PPF curve outwards.

Question 38

What is the economic definition of “immigration”?

Answer 38

Immigration is when people form a different country comes into the U.K. which would cause the PPF curve to shift outwards if each immigrant is working or joining the labour market.

Question 39

What is the economic definition of “Emigration (Outward Immigration)”?

Answer 39

Emigration is when people in the U.K. move abroad which causes the PPF curve to move inwards.