Sac 1

Question 1

Relative Scarcity

Answer 1

Where the needs and wants are virtually unlimited and exceed the limited resources available to satisfy those wants.

Question 2

Needs

Answer 2

The goods and services that people believe are necessities of life and include food, clothing , water, health care and shelter.

Question 3

Wants

Answer 3

Are goods and services that assist us to enjoy a good standard of living, for example iPods, cars or a television. They are things we would like to have rather than what we need to have.

Question 4

Types of Economic resources

Answer 4

• Capital
• Land
• Labour

Question 5

Capital

Answer 5

Is machinery, and equipment used to produce other goods.

Question 6

Land

Answer 6

Is natural resources, things that come from the land, such as water, coal, oil and minerals.

Question 7

Labour

Answer 7

Is people who work, and provide physical power and mental talent.

Question 8

Opportunity Cost

Answer 8

Is the value of the next best alternative forgone whenever a choice is made.

Question 9

A perfectly competitive market

Answer 9

A market structure where there are many buyers and sellers, homogenous products, freedom of entry and exit, perfect information, high mobility of resources and where producers seek to maximise profit while consumers seek to maximise utility.

Question 10

homogenous

Answer 10

Products that are essentially the same

Question 11

The law of supply

Answer 11

As the price increases for a good or service there will generally be an increase in the quantity supplied.

Question 12

Factors that are likely to affect supply and the position on the supply curve:

Answer 12

• Changes in cost of production
• Technological change
• Productivity growth
• Climatic Conditions

Question 13

The law of demand

Answer 13

As the price of a product increases the quantity demanded will tend to decrease. If the price of a price of a product decreases the quantity demanded will and to increase.

Question 14

Factors that are likely to affect demand and the position on the demand curve:

Answer 14

• Changes in disposable income
• The price of substitutes and complementary goods
• Preferences and tastes
• Interset rates
• Consumer confidence

Question 15

The relative price

Answer 15

refers to the price of any one good or service measured in terms of the price of another good or service. It sends clear signals to producers and consumers and directs resources to their highest end use.

Question 16

The Market Equilibrium

Answer 16

Is a situation where the demand for a good or service is equal to the supply of a good or service.

Question 17

Shortage

Answer 17

Is when the the demand is greater than the supply

Question 18

Surplus

Answer 18

Is when the supply is greater than the demand

Question 19

Price elasticity of demand

Answer 19

Responsiveness of a change in the quantity demanded to a change in price.

Question 20

( PED ) high

Answer 20

> / elastic

Question 21

( PED ) low

Answer 21

/< inelastic

Question 22

Disposable income

Answer 22

= income + government transfers - income tax

Question 23

Discretionary income

Answer 23

= income + government transfers - tax - essential expenses( utilities, power, water)

Question 24

Price Change

Answer 24

Is either an expansion or a contraction

Question 25

Shift

Answer 25

is a factor other than price, and if that factor increases or decrease

Question 26

Consumer confidence

Answer 26

Is how optimistic people are feeling about the future

Question 27

Resource allocation

Answer 27

Is the the study of how resources such as land, labour and capital are directed towards the production of goods and services to meet the needs of households, businesses and the government.

Question 28

Problems of weak competition

Answer 28

• Higher prices where competition is weaker
• May have poor quality service
• Reduced efficiency and economic growth

Question 29

Impact of pure competition

Answer 29

• The prices of goods and services decrease as other businesses are offering lower prices to try get customers to purchase their product instead
• Living standards can increase or decrease, due to customers being able to afford things was they are lower prices or jobs being cut so the owners still can make a profit of what they’re selling.

Question 30

Price elasticity of supply

Answer 30

The responsiveness of quantity supplied to changes in price

Question 31

Subsidy

Answer 31

Is a form of assistance paid to producers to encourage production of certain good or services. eg solar panels

Question 32

Excise tax

Answer 32

Indirect tax imposed on a producer or retailer but is usually passed on to the customer.

Question 33

Factors affecting PED

Answer 33

• Degree of necessity
• Availability of substitutes
• Proportion of income and time

Question 34

Factors affecting PES

Answer 34

• Spare capacity
• Production period
• Durability of goods

Question 35

Allocative efficiency

Answer 35

Is a type of efficiency measured by how well resources are being allocated in the economy. If resources are allocated efficiently the goods and services will be made in the right quantities and will generally go to those people who value them the most.

Question 36

Productive efficiency

Answer 36

The volume of output that is produced from a given number of inputs. It refers to how well our factors of production combine to produce goods and services.

Question 37

Dynamic efficiency

Answer 37

How quickly an economy can reallocate resources to achieve allocative efficiency.

Question 38

Inter Temporal efficiency

Answer 38

How well resources are allocated over different time periods.

Question 39

Reasons for Market failure

Answer 39

• Public goods
• Externalities
• Asymmetric Information
• Common access resources

Question 40

Public goods

Answer 40

Goods or services that are both non-excludable and non-rival in consumption. A person who does not pay for the good cannot be excluded from it and just because one person gets enjoyment from it does not mean it should lessen another’s.

Question 41

Externality

Answer 41

It is when a third party is affected from a transaction between two or more other parties. Externalities can occur in the production or the consumption of a good or service.

Question 42

Asymmetric information

Answer 42

When one party has greater information than the other in the exchange of a good or service.

Question 43

Common access resources

Answer 43

These are goods that are not owned by anyone, usually don’t have a market price and therefore available to anyone even if they have not paid for them. eg fish, air.