Economics Part B

Question 1

Define Economy

Answer 1

A system that involves the production, distribution, trade and consumption of goods and services by individuals, businesses, organizations or governments.

Question 2

Define Opportunity Cost

Answer 2

The value of the next best alterative for resources

Question 3

Define Labor Resources

Answer 3

A person’s intellectual or physical skills needed to produce a good or service
E.g. Humans, Builders, Translators

Question 4

Define Capital Resources

Answer 4

Input from manufactured goods, such as machines or computers, that is used to produce further goods and services
E.g. machines, Computers

Question 5

Define Natural Resources

Answer 5

Input from nature, used in the production of goods and services
E.g. Water, Forests, Fertile Land, trees

Question 6

Define Scarcity

Answer 6

Resources are limited but needs and wants are unlimited is why economic system is created to decide how to best use scarce resources to produce needs and wants and how they allocate resources

Question 7

What are the 3 economic questions all economies must answer?

Answer 7

1.What to Produce?
Opportunity cost and scarcity affects decsion of what to produce
2.How to Produce?
To decide what resources to use is most effective
3.For Whom to Produce?
To allocate the produced goods and services by income, needs and wants

Question 8

Define Traditional or Subsistence Economy

Answer 8

-Production and resources are shared
-Produce enough to survive rather than profiting
-No government involvement
E.g Hunters societies, isolated rural agricultural communities

Question 9

Define Market Economy

Answer 9

• Production, resources owned by private individual or groups
  -Make economic decisions based on self interest
  -No government involvement
  E.g US, Canada, UK, but no country has a fully free market economy

Question 10

Define Planned Economy

Answer 10

-Economic system where government or state predominantly owns the resources
-Government make economic decisions
E.g North Korea, Cuba

Question 11

Define Mixed Economy

Answer 11

-Resources own by mix of government and private enterprise and they make economic decisions
E.g Most countries have a mixed economy

Question 12

Define Profit

Answer 12

The amount of money a business earns after taking away its expenses

Question 13

Memorize the circular flow of income model

Answer 13

Income
resources
consumers producers
Output
Expenditure
Leakage Injections
Saving Investment
Taxation Gov spending
Imports Exports

Financial Sector
Saving and investment
Government Sector
Taxation and gov spending
Overseas Sector
Imports and exports

Question 14

Describe Purpose of the Circular Flow of Income Model

Answer 14

To show the flow of money and g/s through the economy with different participants and sectors

Question 15

Define Injection and provide an example

Answer 15

Money that enters the economy
E.g Exporting/selling g/s to overseas countries

Question 16

Define Leakage and provide an example

Answer 16

Money that leaves the economy
E.g Importing/purchasing g/s from overseas countries

Question 17

Define Globalization and Outline Ways Australia is linked to the global economy

Answer 17

The increasing interconnection of countries around the world

*1st way: Australia trade with other nations
*2nd way: International market for labor
*3rd way: People migrate to Australia and live here

Question 18

Explain Why Trading is Important to Australia

Answer 18

*Australians earn money by exporting g/s
*Provides opportunities to purchase g/s at lower prices
*Australians can sell to other countries need
*When having competition, producers are forced to be productive
*Provides employment for both Australians and people overseas

Question 19

Define Commodities

Answer 19

Raw materials or agricultural products that can be bought and sold
E.g Gold, coal, iron

Question 20

Define Economies of Scale

Answer 20

Savings in costs resulting from higher level of production