Pack 1

Question 1

Why is economics a social science?

Answer 1

Economics is a social science, which means it is concerned with the study of human behaviour. It investigates how scarce resources are allocated to provide for unlimited human wants. Economists develop models which attempt to simplify and improve our understanding of how consumers and producers behave.

Question 2

What is the difference between positive and normative statements? With an example of each.

Answer 2

Positive statements are facts and are value free, they can be tested. Normative statements are value judgments and is a non-scientific approach to the subject.

Question 3

What is a value judgement? Give an example in an economics context.

Answer 3

Value judgements are opinions that can’t be tested as true or false. They use words like ought, should, fair, unfair, ect.

Question 4

What are the four key resources (factors of production)? Give a relevant example of each for an industry of your choice.

Answer 4

The four key resources are land, labour, capital goods, and enterprise.

Question 5

Distinguish between renewable and non-renewable resources with an example of each.

Answer 5

Renewable resources: A resource whose stock level can be replenished naturally over a period of time.
Non-renewable resources: A resource whose stock level decreases over time as it is consumed.

Question 6

What does scarcity mean? Give an example of a scarce resource.

Answer 6

A situation that arises because people have unlimited (infinite) wants in the face of limited (finite) resources.

Question 7

How does the economic problem differ from scarcity?

Answer 7

Instead of just focusin on the infinite wants and the finite resource, the economic problem focuse on how best to allocate scarce resources between alternative uses. This arises because resources are scarce so choices must be made about how to best allocate the resources we have.

Question 8

Outline three ways of tackling an economic problem for a context of your choice.

Answer 8

• Willingness to pay
• Merit/need of the users
• First come first served

Question 9

Who are the three economic agents?

Answer 9

• Consumers (individuals and households)
• Firms (businesses)
• The government

Question 10

Define opportunity cost.

Answer 10

The value of the next best alternative, given up. i.e. the benefit that is lost, in making a choice, between two competing uses of scarce resources.

Question 11

Explain two examples of opportunity cost- one to the UK government and one to yourself as a consumer. Explain clearly why it is an opportunity cost.

Answer 11

1- spending money on health care rather than education. This is an opportunity cost because education is the sacrifice and is the next best alternative.
2- Buying an air fryer instead of a microwave. This is an opportunity cost because the microwave is the sacrifice and the next best alternative.