Fundemental Economic Problem

Question 1

State what the fundamental economic problem is

Answer 1

The fact that individuals within an economy have infinite wants while there are scarce resources available to meet these wants

Question 2

State what scarcity is

Answer 2

The state of being short in supply, especially relative to how much something is demanded

Question 3

State what economic activity is

Answer 3

Any time someone provides a product or service in order to satisfy the need or want of themselves or others

Question 4

State what opportunity cost is

Answer 4

The value of the next best option which is forgone when an economic decision is made

Question 5

State what the labour FoP is

Answer 5

The manual labour a person does and is rewarded with wages

Question 6

State what the land FoP is

Answer 6

The naturally occurring resources required to make something and is rewarded with rent

Question 7

State what the capital FoP is

Answer 7

The man made products and tools that help produce a good and is rewarded with interest

Question 8

State what the enterprise FoP is

Answer 8

The risks a corporation or person takes in a business and organise other FoPs and they are rewarded with profit

Question 9

State what an economic good is

Answer 9

Products that people usually trade/buy and are limited

Question 10

State what a free good is

Answer 10

Products that are abundant and usually not traded

Question 11

State what a production possibility diagram is (PPF/PPC/PPD)

Answer 11

Diagram used to show the maximum quantity of two goods that a producer can produce in any combination over a period of time

Question 12

State what productive efficiency is

Answer 12

A situation in which a producer or economy is making full use of the resources available. Producing more of one good or service must mean the other good or service gets produced less

Question 13

State what the market is

Answer 13

Any place where goods and services are exchanged between buyers and sellers. Can be physical and online

Question 14

State what diminishing marginal utility is

Answer 14

as the units of services and goods consumed increase the marginal utility of each new unit consumed will diminish/reduce in value

Question 15

State what demand is

Answer 15

The quantity of a good or service that consumers are both willing and able to buy at a range of prices over a given period of time

Question 16

State what Shift is

Answer 16

The movement of the entire demand curve on a diagram

Question 17

State what Extension/Contraction is

Answer 17

The movement along a demand curve caused by price changes

Question 18

State what substitute goods is

Answer 18

Goods which perform similar roles such that they can replace one another in use or consumption

Question 19

What does TIGER stand for?

Answer 19

Trade Balance
Inflation
Growth (sustainable)
Employment
Redistribution of wealth

Question 20

State what an economic agent is

Answer 20

An individual or company that influences an economy by producing, selling or buying goods and services or investing money

Question 21

State what national income is

Answer 21

Total monetary value of the output of goods and services within an economy over a certain amount of time

Question 22

State what real national income is

Answer 22

Total monetary value of the output of goods and services within an economy over a certain amount of time but adjusted to ignore inflation

Question 23

State what an injection is

Answer 23

money entering the circular flow of income

Question 24

State what withdrawal is

Answer 24

money leaving the circular flow of income

Question 25

State what exports is

Answer 25

the value of goods leaving an economy to be sold abroad

Question 26

State what imports is

Answer 26

the value of goods and services entering an economy from abroad

Question 27

State what ceteris paribus is

Answer 27

other things equal

apart from the named things that have changed the rest remain unchanged

Question 28

state what a finished good is

Answer 28

a good that will not be sold again as part of another good

Question 29

state what a intermidiate good is

Answer 29

a good that is bought and used to make a finished good

Question 30

How do you calculate real GDP?

Answer 30

you use the same prices or the goods and services from a previous year and add up all the goods and services produced from the year you want to measure

Question 31

What are the causes for inflation?

Answer 31

Cost-push inflation = cost of producing goods increases so the companies increase prices of goods to compensate for this

Demand inlfation = When several people want a good or service the price increases as a result as the demand can ethier not keep up or the company wants to make more money. Can be caused by governments lowering taxes so therefore people have more money to spend on goods and services. Or lower interest rates on loans

Printing money - more money around in circulation for the same amount of goods and services, meaning more money is used to buy the goods and services as there is more of it around

Question 32

How do you calculate inflation?

Answer 32

650 most commonly bought items are price checked every day by the Home Office and compared to the prices from last year

Question 33

What is frictional unemployment?

Answer 33

When a worker loses their job and is looking for another one

Question 34

what is seasonal unemployment?

Answer 34

um-employment due to certain industries only producing the goods and services during a certain time of the year

Question 35

What is structural unemployment?

Answer 35

unemployment due to a long term change in that industry or market

Question 36

What is cyclical unemployment?

Answer 36

unemployment due to a significant event like recessions

unemployment goes up and down