Participants & Marginal Analysis

Question 1

What is law 1 of economics?

Answer 1

Scarcity exists

Question 2

What is law 2 of economics

Answer 2

Because of scarcity, we must make choices

Question 3

What is law 3 of economics?

Answer 3

Every choice has an opportunity cost

Question 4

Who are the three economic participants?

Answer 4

Consumers
Firms
Governments

Question 5

What is an incentive?

Answer 5

Something that motivates someone to do something

Question 6

What are consumers’ incentives?

Answer 6

To maximise their utility

Question 7

What are firms’ incentive?

Answer 7

To maximise their profit

Question 8

What are governments incentive?

Answer 8

To maximise the general welfare of its people

Question 9

What is a need?

Answer 9

A basic requirement for survival that one cannot live without

(Food, water)

Question 10

What is a want?

Answer 10

Something one desires that is unnecessary for survival

(Entertainment, fun, pleasure)

Question 11

What are consumers’ concern with wants & needs?

Answer 11

Consumers are constantly in pursuit of satisfying all their needs and as many wants as possible

Question 12

What is the satisfaction of wants and needs referred to as?

Answer 12

Utility

Question 13

How do consumers maximise utility?

Answer 13

Through purchasing goods & services

Question 14

What are goods?

Answer 14

Physical objects that satisfy needs & wants

(Phone, shoes)

Question 15

What are services?

Answer 15

Actions or activities that satisfy needs & wants

(Massage, therapy, consultation)

Question 16

What are goods and services called?

Answer 16

Economic goods

Question 17

What are inputs?

Answer 17

The resources used by firms to produce products

Also known as factors

(Raw materials)

Question 18

What is output?

Answer 18

The finished goods/services produced by firms for profit

(Also known as products)

Question 19

What are costs?

Answer 19

Combined wages paid by a firm to produce economic goods

Question 20

What is revenue?

Answer 20

The price paid to the firm per unit of output sold

(Price x quantity)

Question 21

What does marginal mean?

Answer 21

Each additional

Question 22

How do consumers, firms and governments make decisions?

Answer 22

Marginal analysis

Question 23

What is marginal analysis?

Answer 23

Weighing up marginal cost against marginal benefit

Question 24

What is marginal benefit for firms, consumers and governments

Answer 24

Firms - marginal revenue
Consumers - marginal utility
Governments - marginal social benefit

Question 25

What are economic costs?

Answer 25

Explicit costs + implicit costs

Question 26

What are explicit costs?

Answer 26

Monetary costs

Question 27

What are implicit costs?

Answer 27

Opportunity costs, missed opportunities

Question 28

If marginal benefit > marginal cost…

Answer 28

Choice = yes

Question 29

If marginal benefit < marginal cost…

Answer 29

Choice = no