Micro-Basic economic problem:What is an economy

Question 1

What is an economy?

Answer 1

A system wich determins:
1. What should be produced?
2. How is production organised?
3. For whom is production to take place?
It aims to solve the basic economic problem, and answers vary based on people’s approach to economic freedom ( index)

Question 2

What are the factors of production/ factors input?

Answer 2

1. Capital -> machines, tool factors offices
2. Enterprise-> Seeking out of profitable opportunities for production
3. Labour-> workforce
4. Land ->natural resources
   CELL

Question 3

Define labour.

Answer 3

Workforce of an economy both physical & mental effort going into producing goods

Question 4

Define land

Answer 4

Natural resources within economy the natural resources in an economy

Question 5

Define capital

Answer 5

-Man-made aids to production. Includes artificial resources used to produce more goods and serves
-Man-made supports to enable the operation of the production process is infrastructure

Question 6

Define enterprise

Answer 6

When the other factors of production are bing organised by someone to make goods and services an individual entrepreneur to do 2 things:
1. organise production
2. take on risks of production

Question 7

What is the fundamental economic problem?

Answer 7

How should we make decisions about allocation of scarce resources among competing uses to improve and maximise human happiness nd wealfare.

Question 8

Define scarcity

Answer 8

Resources being finite and limited. causes an issue that the economic agents have to make choices about how to allocate them

Question 9

Define opportunity cost

Answer 9

the forgone benefit that would have been derived by an option not chosen/ the cost of giving up the next best alternative

Question 10

What would the opportunity cost of a good decision be?

Answer 10

less than the benefit of the chosen option