Economic problem

Question 1

what is scarcity?

Answer 1

Economic resources are finite, but human wants and needs are infinite. Choices must therefore be made about which wants and needs to satisfy

Question 2

What must a society decide?-scarcity

Answer 2

what goods and services to produce?
How best to produce goods and services?
Who is to receive goods and services

Question 3

what is opportunity cost?

Answer 3

The cost of a decision expressed in terms of the next best alternative foregone.

Question 4

What are the factors of production? and give examples

Answer 4

Land- ground, hills, seas, oceans, air, fish
Labour- human input, workers, managers
Capital- anything used to provide a service, man-made, computers, machinery
Enterprise- entrepreneur, risk own resources

Question 5

Calculation for opportunity cost:

Answer 5

Opportunity cost= amount of the other good given up/amount of the extra good you enjoy

pain/gain

Question 6

Causes of outward shift in a country’s PPF

Answer 6

• higher productivity
• better management of factor inputs
• increase in stock of capital + labour supply
• innovation + invention of technology, new products + resources
• discovery/extraction of new natural resources

Question 7

Causes of inward shift in a country’s PPF

Answer 7

• natural disasters
• civil war/conflict
• large scale net outward labour migration
• decline in productivity

Question 8

What does unemployment include?

Answer 8

not just people: labour, land, capital, enterprise

Question 9

What is a positive statement?

Answer 9

statement about what is and contains no indication of approval or disapproval. can be wrong; can be tested

Question 10

What is a normative statement?

Answer 10

express a value judgment about whether a situation is desirable or undesirable. opinion- a judgment about what ought to be. cannot be proved or disproved