Main Definitions

Question 1

Three-sector flow model

Answer 1

Displays the behaviour and interaction between economic agents and defines their role in the economy, consumers are responsible for providing businesses with resources and purchasing goods and services.

Question 2

Trade-off

Answer 2

An option that is considered against other alternative options in relation to relative scarcity

Question 3

Opportunity cost

Answer 3

The value lost for another best choice that only considers the trade-off of the value lost for another best choice

Question 4

Mixed economy

Answer 4

Most economic decisions and subsequent distribution are made by reference from mainly the market. In addition, the level of well-being is important to an extent so government intervention can occur.

Question 5

Planned economy

Answer 5

All economic decisions relating to the production and subsequent distribution are made by reference from only the government

Question 6

Pure Market economy

Answer 6

All economic decisions relating to production and subsequent distribution are made by reference from only the price system

Question 7

Three economic questions

Answer 7

1. What and how much to produce
2. How to produce
3. For whom to produce

Question 8

Mixed economy

Answer 8

1. What to produce will mainly be determined by the price system however the government to some extent will intervene when markets fail to efficently allocate to the general wellbeing of society.
2. How to produce same as pure market
3. For whom to produce taxation is used to reduce the level of income inequality