Overall

Question 1

‘What is the basic economic problem?’

Answer 1

‘The basic economic problem is about scarcity and choice due to unlimited wants and limited resources.’

Question 2

‘What are the three key questions arising from the basic economic problem?’

Answer 2

‘What to produce

Question 3

‘What is opportunity cost?’

Answer 3

‘Opportunity cost is the loss of other alternatives when one alternative is chosen.’

Question 4

‘What is demand?’

Answer 4

‘Demand refers to consumers having both the willingness and ability to purchase goods and services.’

Question 5

‘What is the law of demand?’

Answer 5

‘If prices rise

Question 6

‘What factors affect demand?’

Answer 6

‘Consumers’ income

Question 7

‘What is supply?’

Answer 7

‘Supply refers to producers having both the willingness and ability to supply goods and services.’

Question 8

‘What is the law of supply?’

Answer 8

‘If prices rise

Question 9

‘What factors affect supply?’

Answer 9

‘Production costs

Question 10

‘What happens when demand increases and supply remains unchanged?’

Answer 10

‘A shortage occurs

Question 11

‘What happens when supply increases and demand remains unchanged?’

Answer 11

‘A surplus occurs

Question 12

‘What is price elasticity of demand?’

Answer 12

‘Price elasticity of demand measures how responsive the quantity demanded is to changes in price.’

Question 13

‘What is the formula for price elasticity of demand?’

Answer 13

‘Elasticity = (% change in quantity demanded) / (% change in price).’

Question 14

‘What is income elasticity of demand?’

Answer 14

‘Income elasticity measures the relationship between a change in demand and a change in income.’

Question 15

‘What is the circular flow of income?’

Answer 15

‘It shows the relationship between households and firms

Question 16

‘What are injections in the circular flow of income?’

Answer 16

‘Investments

Question 17

‘What are withdrawals in the circular flow of income?’

Answer 17

‘Savings

Question 18

‘What happens when injections exceed withdrawals?’

Answer 18

‘The economy grows as the circular flow expands.’

Question 19

‘What happens when withdrawals exceed injections?’

Answer 19

‘The economy contracts

Question 20

‘What is the multiplier effect?’

Answer 20

‘It refers to the increase in final income arising from an injection of spending.’

Question 21

‘What are limitations of the multiplier effect?’

Answer 21

‘It can lead to inflation and increased borrowing

Question 22

‘What is national income?’

Answer 22

‘National income is the total value of goods and services produced in a country in one year.’

Question 23

‘What are the methods of measuring national income?’

Answer 23

‘Product method

Question 24

‘What are merit goods?’

Answer 24

‘Merit goods are services like education and healthcare that are underprovided by the market.’

Question 25

‘What are public goods?’

Answer 25

‘Public goods are non-excludable and non-rivalrous

Question 26

‘What are negative externalities?’

Answer 26

‘Costs imposed on third parties not involved in a transaction

Question 27

‘What are positive externalities?’

Answer 27

‘Benefits gained by third parties not involved in a transaction

Question 28

‘How does government address market failure?’

Answer 28

‘Through legislation

Question 29

‘What is the free-rider problem?’

Answer 29

‘When individuals consume public goods without paying for them