Study field of economics

Question 1

What is economics?

Answer 1

Study of the use of scarce resources to satisfy unlimited wants.

Question 2

What is scarcity?

Answer 2

Arises because resources that we have available for the production of goods and services are limited while needs and wants for goods and services are unlimited.

Question 3

Resources are classified in three groups:

Answer 3

Natural resources - Land, water, minerals,animals and plants.
Human resources - Entrepreneurs or labour such as economists, builders, architects, accountants,lawyers and cleaners.
Man-made resources - Machines and infrastructure to use to produce goods.

Question 4

Three fundamental questions:

Answer 4

What goods and services to produce?
How to produce the goods and services?
For whom to produce?

Question 5

What goods and services to produce?

Answer 5

Allocate scarce resources to the production of these goods and services.

Question 6

How to produce the goods and services?

Answer 6

Efficiency requirement is very important since resources are limited cannot afford to waste.

Question 7

For whom to produce?

Answer 7

Deals with distribution of goods. Most challenging questions.

Question 8

Factors of production:

Answer 8

Natural resources.
Labour.
Capital.
Entrepreneurship.

Question 9

Natural resources:

Answer 9

Anything people can use which comes from nature. These resources are limited but can be made more productive. Over-exploitation can cause terrible environmental damage.

Question 10

Examples of natural resources:

Answer 10

air, water and soil.
biological resources - plants and animals.
raw materials - minerals.
space and land.
wind, geothermal, tidal and solar energy.

Question 11

Renewable resources:

Answer 11

Usually living and renews themselves, assuming they are not killed off or over-harvested.

Question 12

Flow renewable resources:

Answer 12

Tides, solar power and wind. Do not need regeneration and re-growth.

Question 13

Non-renewable resources:

Answer 13

Cannot be replaced or harvested includes fossil fuels, coals and petroleum.

Question 14

Income from natural resources:

Answer 14

Earn an income in the form of rent.

Question 15

Labour:

Answer 15

Human effort put into production of goods and services, includes physical and mental effort. Separate into quality and quantity.

Question 16

Quantity of labour:

Answer 16

Number of people who are able and willing to work.

Question 17

Quality of labour:

Answer 17

Refers to skill, knowledge and health of workers also called human capital.

Question 18

Income from labour:

Answer 18

Remuneration in the form of wages, salaries, royalties, commissions, consultancy fees, bonuses and fringe benefits. Depends on demand for goods and services produced and how valuable the person is to the firm.

Question 19

Capital:

Answer 19

Characteristic is that it is made with a specific aim of producing goods and services. Economist refers to capital it means “real” capital (“equipment”) not money.

Question 20

Income from capital:

Answer 20

Reward for capital is interest payment. A percentage of the amount loaned.

Question 21

Entrepreneurship:

Answer 21

Willingness to take risks and develop, organise and manage a business. Responsible for the taking of non-routine decisions.

Question 22

Income from entrepreneurship:

Answer 22

Profit is the remuneration. Profits are the difference between revenue from selling the good and cost of producing the good.

Question 23

Opportunity cost:

Answer 23

Is the value to the decision maker of the best alternative that is given up.