Economics Business Studies - T1 & 2

Question 1

Economic Resources by definition are …

Answer 1

… scarce in relation to want/desire for them.

Question 2

What is meant by ‘abundant’ resources?

Answer 2

Resources that are essentially infinite - ‘free goods’

e.g. sunlight + atmosphere

Question 3

Define ‘Opportunity Cost’.

Answer 3

Next best alternative, forgone after making a choice.

Question 4

Define Investment.

Answer 4

Purchase of capital.

Question 5

What are the 3 questions that express the economic problem?

Answer 5

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

Question 6

Prices help …

Answer 6

… direct resources into the most profitable products for firms to produce.

Question 7

What helps establish prices?

Answer 7

Patterns of consumer demand.

Question 8

What is price mechanism?

Answer 8

Prices rise when products are in demand so profit can be made. Resources are allocated into making these products.

Question 9

List Maslow’s Hierarchy of Needs.

Answer 9

Self-actualization
Esteem
Love/Belonging
Safety
Physiological - 1

Question 10

Describe Traditional Economic Systems.

Answer 10

Based on agriculture

Limited barter trade

Question 11

Describe Market Economies.

Answer 11

Based upon Supply and Demand
Usually focuses on consumer goods
Little government interference

Question 12

Describe Command/Planned Economies.

Answer 12

Controlled by a strong, centralized government
Usually focuses on industrial goods
Little attention paid to agriculture and consumer goods

Question 13

Describe Mixed Economies.

Answer 13

Combination of Market and Planned economic systems
Market forces control most consumer goods
Government directs industry in need areas
Has a state of static GDP

Question 14

What does GDP stand for?

Answer 14

Gross Domestic Product.

Question 15

What are the limited means?

Answer 15

Time, Income & Skills.

Question 16

What separates demand from wants?

Answer 16

Being willing and able to pay for a good or service.

Question 17

State the Law of Demand.

Answer 17

Demand takes a negative slope to reflect the law of demand.

As the price of the product increases, quantity demanded decreases, and vice versa, assuming ceteris paribus.

Question 18

What is Market Demand?

Answer 18

A summation of all individual demand.

Question 19

List Ceteris Paribus factors.

Answer 19

Income, consumer tastes/preferences, price of economic complements, price of economic substitutes.