Introduction

Question 1

Define economics.

Answer 1

Economics is a social science which studies how individual consumers, firms, industries and governments make choices on allocating their scarce resources to satisfy their unlimited wants, knowing that the option not chosen for resource allocation is the opportunity cost. Opportunity cost is the foregone alternative.

Question 2

Define opportunity cost.

Answer 2

Factors of production are scarce. They have alternative uses and therefore choices must be made when deciding what to produce or purchase. Opportunity cost is about the choices individual consumers, firms, industries and governments make. The option not chosen for resource allocation is the opportunity cost. Opportunity cost us the foregone alternative.

Question 3

Define externalities.

Answer 3

Externalities are the unintended side effects of a calculated decision to do something.

Question 4

Define wealth.

Answer 4

A stock of goods and services that have been accumulated.

Question 5

Deform income.

Answer 5

A flow of goods and services.

Question 6

Define a free good.

Answer 6

A free good is a good which is plentiful in supply.

Question 7

Define a capital good.

Answer 7

A capital good is wanted for the contribution it makes in producing goods and services.

Question 8

Define an open economy.

Answer 8

Open economies trade with other countries.

Question 9

Define a closed economy.

Answer 9

Closed economies do not trade with other countries.