M 1.1

Question 1

What is economics?

Answer 1

study of how the worlds scarce resources are allocated to competing uses to satisfy society’s wants

Question 2

What are positive economic statements?

Answer 2

objective statements that can be tested against facts to be declared either true or false

Question 3

what are normative economic statements?

Answer 3

a subjective opinion, or value judgement that cannot be declared either true or false

often involve opinions on what individuals, firms or government should do

Question 4

What is the main purpose of economic activity?

Answer 4

to satisfy society’s needs and wants

Question 5

What is a need?

Answer 5

something that humans require to survive (food, shelter or warmth)

Question 6

What is a want?

Answer 6

something non-essential for survival but which people think will improve standard of living

Question 7

what is economic welfare?

Answer 7

the standard of living or general wellbeing of people in society

Question 8

What does satisfying societies needs and wants in terms or material and non material things lead to?

Answer 8

increased economic welfare

Question 9

What does GDP stand for?

Answer 9

gross domestic product

Question 10

What are the countries economic resources known as?

Answer 10

factors of production

Question 11

What are factors of production?

Answer 11

a countrys productive economic resources divided into capital, enterprise, land and labour

Question 12

What are the 4 factors of production?

Answer 12

• capital
• enterprise
• land
• labour

Question 13

What is capital?

Answer 13

man made physical equipment used to make goods and services. Includes machinary and computer equipment

Question 14

What is enterprise?

Answer 14

entrepreneurs are individuals who take business risk in combining the other three factors of production in order to produce a good or service

Question 15

What is Land?

Answer 15

all naturally occuring resources such as minerals, the sea, fertile land and the environment. further divided: renewable and non renewable

Question 16

What is labour?

Answer 16

people involved in production, sometimes referred to as human capital

Question 17

What is the basic economic problem?

Answer 17

scarce economic resources compared with society’s unlimited wants

Question 18

What does the basic economic problem mean?

Answer 18

choices must be made when deciding how to allocate these resources

Question 19

What are the three economic questions?

Answer 19

• What to produce and in what quantities
• How should goods and services be produced ]
• to whom should goods and services be allocated

Question 20

What are opportunity costs?

Answer 20

the cost of the next best alternative that you give up when you make a choice

Question 21

What are economic goods/

Answer 21

those that use up scarce economic resources in their production. most consumer goods

Question 22

What are free goods?

Answer 22

a good that does not have an opportunity cost in consumption because it does not use up scarce resources

Question 23

What does PPC stand for?

Answer 23

production possibility curve

Question 24

What is a PPC?

Answer 24

a diagram which shows the maximum possible output combinations of two goods in an economy, assuming full employment of efficient resources

Question 25

What are changes in the PPC caused by?

Answer 25

quantity and effeciency of the production

Question 26

WHat are the factors causing an outwards shift in the PPC

Answer 26

• technological improvements that lead to increased productivity of capital equipment
• discovery of new resources
• improvements to education adn training, more productive workforce
• changes that lead to an increase in working population (increase in immigration)

Question 27

what are the factors leading to an inward shift of the PPC?

Answer 27

• natural disasters (earthquakes, floods)
• wars
• global warming / climate change (loss of farmland)
• prolonged recession, may lead to permanent loss of productive capacity if businesses close down

Question 28

WHat is economic growth?

Answer 28

an increase in the productive capacity of an economy over time

Question 29

What are the two types of economic efficiency?

Answer 29

productive efficiency and allocative effeciency

Question 30

What is productive effeciency?

Answer 30

when maximum output is produced from the available factors of production and when it is not possible to produce more of one good or service without producing less of another

Question 31

What is allocative effeciency?

Answer 31

when an economy’s factors of production are used to produce the combination of goods and services that maximises societies welfare

Question 32

What is a market?

Answer 32

a situation in which buyers and sellers come together to engage in trade

Question 33

What is a competitive market?

Answer 33

a situation where there is a large number of potential buyers and sellers with abundant information about the market

Question 34

WHat is equilibrium price?

Answer 34

the price at which the planned demand of consumers equals the planned supply of firms

Question 35

What is demand?

Answer 35

the quantity of a good or service that consumers are willing and able to buy at given prices in a particular time period

Question 36

What is effective demand?

Answer 36

consumers desire to buy a good, backed up by the ability to pay

Question 37

What does the law of demand state?

Answer 37

as the price of a good or service falls, the quantity demand increases

Question 38

WHat is an extension of demand?

Answer 38

an increase in the quantity demanded resulting from a fall in price

Question 39

What is contraction of demand?

Answer 39

a fall in quantity demanded resulting from an increase in price

Question 40

What causes a demand curve to move up or down?

Answer 40

change in price of a good or service

Question 41

What are conditions of demand?

Answer 41

factors that lead to a shift in postition of the demand curve

Question 42

What are the factors of contions of demand?

Answer 42

• real disposable incomes ( incomes of individuals after the effects of inflation, taxation and benifits taken into account)
• tastes and preferances (societies current preferance)
• population (size, age and gender will affect market size)
• prices of substitute products
• prices of complementary demand

Question 43

What is taxation?

Answer 43

a charge places by the government on various forms of economic activity

Question 44

What is a substitute?

Answer 44

a good that may be consumed as an alternative to another good

Question 45

What is a complement?

Answer 45

a good that tends to be consumed together with another good