The Basic Economic Problem

Question 1

What are needs?

Answer 1

Basic requirements for human survival

Question 2

What are wants?

Answer 2

People’s desires for goods and services

Question 3

What is the basic economic problem?

Answer 3

Resources are finite but wants are infinite

Question 4

Define ‘opportunity cost’.

Answer 4

The value of the next best alternative

Question 5

What are the 3 key economic questions?

Answer 5

What to produce?
How to produce?
For whom to produce?

Question 6

What are consumer goods?

Answer 6

Goods purchased by households (eg. cars, sweets and furniture)

Question 7

What are capital goods?

Answer 7

Goods purchased by firms and used to produce other goods (eg. factory machinery, tools and equipment)

Question 8

Name four situations where the PPC can shift.

Answer 8

Improved efficiency
New resources are found
New technology
Education and training

Question 9

Name four reasons why consumers may fail to maximise benefit.

Answer 9

Difficulty in calculating benefits
Addiction
Influenced by others (peer pressure)
Imperfect information

Question 10

Name four reasons why producers may not/fail to maximise profit.

Answer 10

Business performance influenced by behaviour of others
Having other objectives
Operating as social enterprises
Set up as registered charities

Question 11

Define the term ‘nudge’.

Answer 11

A technique in order to change someone’s behaviour in an easy, low-cost way without reducing the number of choices available