Scarcity, Choice, Opportunity

Question 1

What are the 4 factors of production?

Answer 1

Capital-Physical capital, the total sum of buildings, vehicles and computers used by workers to produce an output
Enterprise-Managerial ability – just together the other factors
Land-Physical space For roads factories and all materials for example oil, copper, fertile soil
Labour-Also known as human capital. The workforce of an economy

Question 2

What is infrastructure? Give two examples

Answer 2

Infrastructure is a crucial type of capital. Examples include:

• road and railway networks
• airports and docks
• telecommunications e.g. cables and satellites to enable web access

Question 3

What are renewable resources?

Answer 3

Commodities such as solar energy, oxygen, biomass, fish stocks or forestry that are inexhaustible or replaceable over time, providing that the rate of extraction of the results is less than the natural rate at which the resource renews it self

Question 4

What are non-renewable or finite resources?

Answer 4

Cannot be renewed. E. G. Crude oil, cold, natural gas and other items produced from fossil fuels where no mechanisms exist presently to replenish them.

Question 5

What are semi renewable resources?

Answer 5

A resource that can be renewed due to human intervention for example planting trees.

Question 6

What’s the difference between renewable goods and free goods?

Answer 6

Renewable good renew themselves but to take up factors such as land labour capital and enterprise
Free goods do not take up any factor inputs for example fresh air, and people can’t price it

Question 7

What is an economic good?

Answer 7

• Something that can be priced or traded

- opportunity cost – the loss of other alternatives when one alternative is chosen

Question 8

What are public and private goods?

Answer 8

Public goods – free for us all to use, nonexcludable, non-rivalry. For example street lighting
Private goods – excludable (not everyone can have/use it) for example a house. Rivalry – there is competition to have it

Question 9

What is economic activity?

Answer 9

The activity of making, purchasing, or selling goods or services e.g:
-Working for money 
– selling 
– buying 
– distributing goods
 – making something to then sell

Question 10

What is the purpose of economic activity?

Answer 10

The central purpose is:

the production of goods and services to satisfy our ever-changing needs and wants

Question 11

The basic economic problem is about scarcity and choice. Because of scarcity, choices have to be made by economic agents. What does this mean?

Answer 11

Economic agents make decisions that have an affect on an economy by buying, selling and producing. Every choice made involves a range of alternatives and agents make the choice that satisfies them the most

Question 12

What are economic agents and what are they assumed to do?

Answer 12

• Economic agents include consumers, workers, producers/businesses, governments et cetera. They have to allocate their scarce resources between competing uses
• economic agents are assumed to act rationally – the choice is maximise their satisfaction from a decision

Question 13

What are the different objectives of different economic agents
 – produces 
– workers 
– individual consumers
 – households
 – governments

Answer 13

Produces – produce the most amount of product for more sales and increased revenue plus market share. Or maximise environmental/ethical

Workers – maximise income/free time/working conditions

Individual consumers – maximise security or spending on wants

Households – security, maximum asset value, efficiency and resources et cetera water/electric usages

Governments - Maximise economic growth (GDP)and employment, low inflation, taxes, balance in input and output

Question 14

What is utility maximises?

Answer 14

The concept that economic agents(Individuals and firms) seek to get to the highest satisfaction/profit from their economic decisions

Question 15

What are the three maginal changes?

Answer 15

Marginal utility – how much satisfaction from one extra item consumed Total utility – satisfaction overall
Law of diminishing marginal utility – the decrease in satisfaction after the first purchase. Satisfaction reducing the more that it is consumed.

Question 16

What is scarcity of resources?

Answer 16

It means that there isn’t enough resources whether it be money or raw materials to do everything, so a choice has to be made, meaning choosing more of one thing can only be achieved by giving up something else in exchange

Question 17

Define opportunity cost

Answer 17

There is a constant opportunity cost involved in making economic decisions, and it means taking the best alternative because you cannot get everything. Opportunity cost as is the cost of any choice in terms of making the next best alternative foregone. It insures a more efficient allocation of resources

Question 18

What is the importance of opportunity cost?

Answer 18

-It helps insure the most efficient allocation of resources
– it can be used by consumers to look at the profit forgone by not making an alternative product
– used by the government to look at lost value of society from policies chosen not to be implemented
– maximised profit

Question 19

What are problems with the concept of opportunity cost?

Answer 19

– Not all opportunities may be known
– not all opportunities will be apparent due to lack of information
– some factors can be difficult to switch
– some factors do not have alternative uses

Question 20

What is an economy? (Or economic system)

Answer 20

And economy is into related production/consumption activities

Question 21

Structure the basic economic problem

Answer 21

Unlimited wants and unlimited resources equals Scarcity which equals choice was equals what to produce, how to produce, for whom to produce

However the decision-making and allocation of resources will differ depending on the type of economy

Question 22

What is a free market economy?

Answer 22

– Resources are allocated based on supply and demand and the price mechanism
– the public is in control, this may neglect some of the population
– capitalist economies

Question 23

What is a command economy?

Answer 23

– It is the government that decides how resources should be allocated in a command economy
– the government is in control

Question 24

What is a mixed economy?

Answer 24

– When resources are both allocated based on supply and demand and the government make some decisions. It is usually a 60/40 or vice versa control percentage in mixed economies
-The UK is a mixed economy

Question 25

What is positive economic’s?

Answer 25

Positive economic’s is the scientific object of study of the subject. They are statements that can be proven to be true or false. They can be about the future or current, as long as they will eventually be proven true of false

Question 26

What is normative economic’s?

Answer 26

Normative economic’s statements that cannot be proven or disproved because they are like suggestions that you propose ideas. They are usually followed by positive economic statements, for example “pensions should be raised”– normative. “Pensions raised would mean… “ Which if pensions were raised could be proven ergo positive statement

Question 27

Give examples of:
– primary 
– secondary/manufacturing 
– tertiary/service
   Sectors

Answer 27

– Primary = agriculture, oil, extraction, mining, fishing

• Secondary = Food-processing, furniture making, steel production
• Tertiary = Transport, education, health, sports and leisure, distribution

Question 28

What two sectors can the economy be split into?

Answer 28

The public sector – the state or government sector of an economy

The private sector – the part of the economy owned by private individuals, companies and charities