Exam 1 - Chapter 3

Question 1

What are the four agents of production?

Answer 1

• Land (cost of acquiring)
• Labor (physical and intellectual contribution)
• Capital (equipment, buildings, and infrastructure)
• Entrepreneurial Coordination (Profit above the return of equity)

These agents are essential economic ingredients that contribute to the production process.

Question 2

What does ‘Utility’ refer to in the context of a factor of value?

Answer 2

Ability of a product to satisfy a human want, need or desire

Utility is a key factor in determining the value of a product.

Question 3

Define ‘Scarcity’ as a factor of value.

Answer 3

Supply relative to demand

Scarcity affects the availability of goods and their perceived value in the market.

Question 4

What is meant by ‘Desire’ in terms of value factors?

Answer 4

Wish to satisfy human needs

Desire drives consumer behavior and influences market dynamics.

Question 5

What does ‘Effective Purchasing Power’ indicate in terms of value factors?

Answer 5

Ability to participate in the market

This factor reflects the capacity of individuals or groups to buy goods and services.

Question 6

How is ‘Demand’ created? (4 factors of value)

Answer 6

Demand is influenced by utility, scarcity, desire, and effective purchasing power.

Question 7

What creates ‘Supply’ in the market?

Answer 7

Entrepreneurs create to satisfy demand

Supply is a response to the demand created by consumers.

Question 8

What is the difference between Price, Cost, and Value?

Answer 8

Price: Amount paid in exchange
Cost: Total dollar expenditures for an improvement
Value: Monetary worth of a property, good or service

Understanding these concepts is crucial for economic analysis.

Question 9

Define ‘Price’.

Answer 9

Amount being paid in the exchange

Price is often determined by market conditions and consumer willingness to pay.

Question 10

What are ‘Direct’ or ‘Hard’ costs?

Answer 10

• Labor
• Materials

Direct costs are expenses that can be directly attributed to the production of goods or services.

Question 11

What are ‘Indirect Costs’?

Answer 11

• Permits
• Financing
• Architect
• Appraisal
• Survey

Indirect costs encompass expenses that are not directly tied to production but are necessary for overall operations.

Question 12

What is ‘Value’ in economic terms?

Answer 12

Monetary worth of a property, good or service to buyers and sellers at a given time

Value reflects the present worth of future benefits.

Question 13

List the types of Value.

Answer 13

• Market
• Use
• Investment
• Going Concern
• Insurable
• Assessed

Each type of value has different implications in economic transactions.

Question 14

What are the 10 fundamental appraisal concepts? (These concepts are vital for understanding property valuation and market dynamics).

Hint: ACES COST CC

Answer 14

A.C.E.S. C.O.S.T. C.C.

Each letter represents a key concept:
• A – Anticipation
• C – Change
• E – Externalities
• S – Supply & Demand
• C – Competition
• O – Opportunity Cost
• S – Substitution
• T – Surplus Productivity
• C – Contribution
• C – Conformity