Economics

Question 1

Market

Answer 1

A situation where potential buyers are in contact with potential sellers and there is a mean of exchange

Question 2

Consumer Sovereignty

Answer 2

The consumer is king (sovereign) in deciding where resources are allocated in a market economy

Question 3

Opportunity cost

Answer 3

The lost alternative is to which the economic resources could have been allocated

Question 4

Ecomonics

Answer 4

Allocations of scarce resources

Question 5

3 economic questions

Answer 5

What to produce? How to produce? For whom to produce?

Question 6

Resources

Answer 6

Land- natural resources (forests provide timber for building)
Labour- the person power available to work in the production process (trades)
Capital- the machinery, plants and buildings made by people (ladders, trucks, tractors)

Question 7

Needs

Answer 7

Things that are essential to everyday basic living (food, clothing, shelter)

Question 8

Wants

Answer 8

Things that people desire but are not essential to everyday basic living (TV, phones)

Question 9

Scarcity

Answer 9

Having unlimited wants but limited resources

Question 10

Complementary products

Answer 10

A good with a negative elasticity of demand. A goods demand is increased when the price of another is decreased.

Question 11

Substitute products

Answer 11

A good with a positive elasticity of demand. A goods demand is increased when the price of another is also increased.

Question 12

Factors of production

Answer 12

The inputs that are used in the production of goods and services. Land, labour, capital and entrepreneurship.

Question 13

Law of demand

Answer 13

The higher the price of an item, the less that will be demanded. The lower price of an item, the higher demand.

Question 14

Factors that could increase the the demand of a product

Answer 14

Elements that influence consumer willingness and ability to pay. a change in the weather/seasons, an increase in income, an increase in the price of a substitute product, a decrease in the price of a complementary product.

Question 15

Law of supply

Answer 15

The higher the price that can be gained for an item, the more that will be supplied, the lower the price that can be gained for an item, the less that will be supplied.

Question 16

Factors that could increase the supply of a product (ACE)

Answer 16

Weather events- cyclones, floods, droughts
Price of inputs- the lower the price of inputs, the more profit per unit and the more quantities producers are willing to supply.
Price of other products- if the price of other products rise, and the profits increase, the producers may switch to supplying more of this product and less of the original.

Question 17

Availability of resources

Answer 17

Anything that provides more resources for production, allowing more to be supplied:
Increased labour force
New discoveries of raw materials such as iron, copper
Good climatic conditions so there are more raw materials such as wheat, cotton, milk.

Question 18

Cost of resources

Answer 18

Anything that reduces the costs of production so that more money is available for other resources, leading to increased supply:
Lower tax rates
Lower wages for employees
Lower interest rates
Lower costs of raw materials

Question 19

Efficiency in resources use

Answer 19

Anything that results in more efficient use being made of existing resources:
Better training of workers
New machinery that increases productivity rates
New production methods that reduce the amount of waste

Question 20

Gross Domestic Product (GDP)

Answer 20

A measure of all goods and services produced in Australia during a year; obtained by adding together the total amount (in $)