Introduction Chapter 1 & 2

Question 1

Demand

Answer 1

The quantity of a good households are willing and able to buy in a market.

Question 2

Supply

Answer 2

The quantity of a good firms are prepared to sell in a market.

Question 3

Normative Statement

Answer 3

An opinion that cannot be scientifically tested.

Question 4

Economics

Answer 4

The study of choice and decision making in a world with limited resources.

Question 5

Positive Statement

Answer 5

A statement that can be scientifically tested and possibly falsified

Question 6

Macroeconomics

Answer 6

Examines the economy as a whole.

Question 7

Microeconomics

Answer 7

Examines individual consumer, firms and markets in the economy.

Question 8

The economic problem

Answer 8

Limited amount of resources are available to produce the unlimited quantity of goods and services people desire.

Question 9

A production possibility diagram

Answer 9

Shows different possible combinations of goods that can be produced using available resources.

Question 10

A consumer good

Answer 10

Used by consumer to meet their needs or wants. E.G. food or an iPod.

Question 11

A capital good

Answer 11

Used to produce other goods, including consumer goods E.G. a machine.

Question 12

Technical progress

Answer 12

Improves methods of producing existing goods and enables completely new types of good to be produced.

Question 13

Opportunity cost

Answer 13

The cost of the next best alternative sacrificed.

Question 14

Finite resource

Answer 14

A resource which is scarce and runs out as it is used E.G. oil.

Question 15

Free good

Answer 15

A good, for which there are no costs of production and no scarcity E.G. air.

Question 16

Renewable resource

Answer 16

A resource that with careful management can be renewed as it is used E.G. timber.

Question 17

Production

Answer 17

A process, or set of processes, that converts inputs into outputs.

Question 18

Factors of production

Answer 18

Inputs into the production process. LAND, LABOUR, CAPITAL and ENTERPRISE.

Question 19

Command economy

Answer 19

The planning mechanism allocates resources between competing uses.

Question 20

Market economy

Answer 20

Markets and prices allocate resources between competing uses.

Question 21

Capitalism

Answer 21

The means of production are privately owned.

Question 22

Socialism

Answer 22

The means of production are socially (state) owned.

Question 23

A mixed economy

Answer 23

Contains both market and non-market sectors and a substantial public sector as well as a private sector.

Question 24

Privatisation

Answer 24

Selling off state-owned assets such as nationalised industries to private ownership

Question 25

Marketisation or commercialisation

Answer 25

Charging a market price for goods and services that the state previously provided ‘free’.

Question 26

Deregulation

Answer 26

Removing barriers to entry and government control from the operations of markets.