LS1 - The Economic Problem

Question 1

What is economics?

Answer 1

The study of the economy

Question 2

What is an economy?

Answer 2

All the goods and services produced within an area

Question 3

What is a renewable resource?

Answer 3

A resource which regenerates faster than it is being used

Question 4

What is a non-renewable resource?

Answer 4

A resource which regenerates slower than it is being used

Question 5

What are the 4 factors of production?

Answer 5

Capital, Land, Labour, Enterprise

Question 6

What is Capital?

Answer 6

Machinery / tools which are used to make goods

Question 7

What is Enterprise?

Answer 7

The willingness of people in a firm to take risks to try and make a profit

Question 8

What is Land?

Answer 8

The natural resources utilised by a firm in production

Question 9

What is Labour?

Answer 9

The production workforce that produces goods

Question 10

Why is Enterprise risky?

Answer 10

Because success can lead to profit, but failure can lead to loss of money or even bankruptcy

Question 11

What does scarce mean?

Answer 11

When something is insufficient in quantity

Question 12

What is the economic problem?

Answer 12

How to use available scarce resources to to satisfy consumers’ infinite wants and needs

Question 13

What 3 key questions for economists investigate in regards to the economic problem?

Answer 13

What to produce?
How to produce it?
Who to produce it for?

Question 14

What is the consumption decision?

Answer 14

Deciding what type of goods and services should be prioritised for production

Question 15

What is the production decision?

Answer 15

Deciding how to produce goods and services in the most efficient way

Question 16

What is the distribution decision?

Answer 16

Deciding how to allocate the goods and services which the economy produced

Question 17

What are economic agents?

Answer 17

Groups of people who participate in the economy

Question 18

Name types of economic agents.

Answer 18

Producers, consumers, the government

Question 19

What are producers?

Answer 19

A type of economic agent who produces goods and services

Question 20

What is a firm?

Answer 20

Another term for a ‘business’

Question 21

What are consumers?

Answer 21

People who buy goods and services produced by firms

Question 22

What is the government’s role in the economy?

Answer 22

Setting rules that other economic agents must follow, as well as producing their own public goods and services

Question 23

What are free goods?

Answer 23

Goods which are not scarce and do not have an opportunity cost

Question 24

Why has the number of free goods recently begun decreasing?

Answer 24

Because of the expanding population and increase in production has lead to higher demand for products and more pollution destroying the environment

Question 25

What is the difference between wants and needs?

Answer 25

Needs are basic resources which you require to live, and they are finite. Wants are what would like to have and they are infinite.

Question 26

What is an economic good?

Answer 26

A resource which is scarce

Question 27

What are the 2 types of Capital?

Answer 27

Fixed Capital

Circulating / Working Capital

Question 28

What is Fixed Capital?

Answer 28

Fixed capital is used to transform working capital into products. They are not transformed into final products. Examples - factories, machinery, offices

Question 29

What is Working / Circulating Capital?

Answer 29

Raw materials or semi-manufactured goods which move through the production process until they are sold to the consumer

Question 30

What is human capital?

Answer 30

The value of the productive potential of a worker

Question 31

What is the difference between goods and services?

Answer 31

Goods are tangible, services are intangible

Question 32

What does tangible mean?

Answer 32

Something you can touch

Question 33

What does intangible mean?

Answer 33

Something you cannot touch