JESS Test Oct 2024

Question 1

Scarcity

Answer 1

Scarcity – it is the situation in which available resources (land, labour, capital, entrepreneurship) are limited; they are not enough to produce everything that human beings need and want.

Question 2

What is the basic economic problem

Answer 2

The basic economic problem occurs because resources are scarce – but our wants are infinite. As resources are scarce and our wants are never-ending, we have to allocate resources.

When allocating resources, individuals, firms and governments must all make decisions about what to produce, how to produce, and for whom to produce.

Opportunity Cost

Question 3

Needs

Answer 3

Needs – something essential to survival – food, water, warmth, clothing and shelter.

Question 4

Wants

Answer 4

Wants – something you would like to have, but is not essential to survival – for example cars, mobile phones and chocolate.

Question 5

Factors of production

Answer 5

Factors of production – the resources we have available to produce goods and services (land, labour, capital and entrepreneurship).

Question 6

Economics

Answer 6

is the study of choices leading to the best possible use of scarce resources in order to best satisfy unlimited human needs and wants

Question 7

Goods

Answer 7

are items that you can touch (tangible) – you can take them home and use them. An example of a good is a pen or a packet of crisps.

Question 8

Services

Answer 8

a service is something that someone provides for you; you cannot touch it (intangible). Examples include tourism and banking.

Question 9

Opportunity Cost

Answer 9

the next best alternative foregone when making a choice – what we give up when we make a choice.

Question 10

Resource allocation

Answer 10

Resource allocation – assigning an economy’s available resources, i.e., the factors of production, to certain uses which have to be chosen among the many possible alternatives available.

Question 11

Resources

Answer 11

Resources – something used to produce output.

Question 12

Quantity Demanded/Demand

Answer 12

is the amount of a good or service that a consumer is willing and able to purchase at a given price within a certain period of time.

Question 13

Law of Demand

Answer 13

states that “as the price of a product falls, the quantity demanded of the product will usually increase, ceteris paribus”.

When the price rises the QD falls

When the price falls the QD rises

Question 14

Demand Curve

Answer 14

represents the relationship between the price and the quantity demanded of a product, ceteris paribu

Question 15

Supply

Answer 15

Supply is the amount of a good/service that a producer is willing and able to supply at a given price in a given time period

Question 16

Supply Curve

Answer 16

represents the relationship between the price and the quantity supplied of a product, ceteris paribus.

Question 17

YED

Answer 17

Income elasticity of demand: measures the responsiveness of demand to a change in consumer’s income.

Shifts demand curve due to changed income

Question 18

PED

Answer 18

Price elasticity of demand: measures the responsiveness of quantity demanded to a change in price, along a given demand curve.

PED = Percentage Change in Quantity Demanded / Percentage Change in Price

Question 19

PES

Answer 19

Price elasticity of supply: measures the responsiveness of quantity supplied to a change in price along a given supply curve.

Question 20

XED

Answer 20

Cross price elasticity of demand: measures the responsiveness of a demand for one good to a change in price of another good.

Movement along the curve for one good causing a shift in demand for another good

Question 21

Consumer Surplus

Answer 21

The difference between what the consumer was willing and able to pay (the demand curve) for a good or a service and what he actually paid (the market price).

Question 22

Producer Surplus

Answer 22

the difference between the amount a producer is willing to accept for a good or service and the amount they actually receive. It represents the benefit producers receive from selling at a market price higher than their minimum acceptable price.

Question 23

Manufactured goods

Answer 23

washing machines, phones, cars etc

Question 24

commodities

Answer 24

agricultural products or raw materials

Commodities are necessities as they are raw materials used in the production of goods

Question 25

Secondary sector

Answer 25

Where raw materials are manufactured into goods
eg car manufacturing, manufacture of electronic goods eg phones, computure

Question 26

Tertiary sector

Answer 26

The service sector
eg banking, tourism, education

Question 27

Primary sector

Answer 27

Where the extraction of raw materials take place
eg Mining, farming, fishing, oil extraction

Question 28

Consumer

Answer 28

A person who buys and uses goods and sercies

Question 29

Supplier

Answer 29

Businesses that produce goods and srevices

Question 30

PPC

Answer 30

The Production Possibility Curve (PPC) is an economic model that considers the maximum possible production (output) that a country can generate if it uses all of its factors of production to produce only two goods/services

Question 31

Substitutes

Answer 31

Substitutes are products you can use instead of a different good or service (e.g., Coke and Pepsi are substitutes, so too are petrol and public bus rides.

Question 32

Complements

Answer 32

Complements are products that are used and consumed with each other (e.g., smartphones and apps). Once the cost of smartphones falls the quantity demanded of this good increases. Extra apps are then sold.

Question 33

Inferior goods

Answer 33

Inferior goods are those goods and services for which demand tends to fall when income rises. Examples would include used cars and cheaper cuts of meat. Demand for inferior goods decreases when income increases. The demand curve moves down and left to indicate less is required at each price.

Question 34

Normal goods

Answer 34

Normal goods are goods and services for which demand increases as consumers’ income increases and for which demand goes down when income is lower. Examples include new cars and holidays.

Demand for normal goods will increase as consumers’ income increases. The demand curve shifts up and right to illustrate that more of the good or service is required at each price.

Question 35

Ceteris paribus

Answer 35

Ceteris paribus means “Other things being equal” and it is used as a reminder that all variables other than the ones being studied are assumed to be constant.

Question 36

Market

Answer 36

market is any arrangement that allows buyers and sellers of goods and services and resources to be linked together and exchange things.

Question 37

Excess supply

Answer 37

This occurs where the price of the good is higher than the equilibrium price, such that the quantity supplied is greater than the quantity demanded.

Question 38

Excess demand

Answer 38

This occurs where the price of a good is lower than the equilibrium price, such that the quantity demanded is greater than the quantity supplied.

Question 39

MEP

Question 40

Signalling

Answer 40

If the price of a good or service increases, it signals to producers that there is high demand for it, and they will produce and supply more of it.

Question 41

Rationing

Answer 41

rationing refers to the allocation of scarce goods or resources among competing individuals or groups. Rationing typically occurs when the demand for a particular good or resource exceeds its available supply.

Question 42

price mechanism

Answer 42

The means by which millions of decisions taken by consumers and businesses interact to determine the allocation of scarce resources between competing uses. In a free market economy, resources are allocated through the price mechanism.

Question 43

Factors that affect elasticity with examples

Answer 43

The factors that determine the price elasticity of demand

These can be summarised using the acronym SPLAT

Substitutes

Proportion of income

Luxury or necessity

Addictiveness

Time period

Question 44

Consumer behaviour

Question 45

Producer behavior