The Economic Problem

Question 1

Define Economy

Answer 1

The goods and services produced in an area

Question 2

What is the difference between a good and a service

Answer 2

goods are tangible, services are not

Question 3

What is corporation tax

Answer 3

Tax placed on profit

Question 4

What are the factors of production

Answer 4

Capital
Enterprise
Labour
Land

Question 5

What are the two types of land

Answer 5

Renewable and Non-Renewable

Question 6

Define renewable resource

Answer 6

A resource capable of being regenerated

Question 7

What is capital in terms of production

Answer 7

Man made tools

Question 8

What is labour in terms of production

Answer 8

Human Resources (Workers)

Question 9

Why is an enterprise important in terms of the factors of production

Answer 9

They are responsible for managing the other 3 factors of production

Question 10

What is success defined as a enterprise

Answer 10

Profit

Question 11

What is failure defined as for an enterprise

Answer 11

A loss of money

Question 12

What can a loss of money lead to for an enterprise

Answer 12

A potential bankruptcy

Question 13

Define The Economic Problem

Answer 13

How to use the available scarce resources to satisfy people’s infinite needs and wants as effectively as possible

Question 14

Define Scarce

Answer 14

Not sufficient in quantity or amount

Question 15

Name the 3 economic agents

Answer 15

producers, consumers, government

Question 16

What are the economic agents

Answer 16

Groups that participate in an economy

Question 17

Is labour scarce?

Answer 17

Yes because of skill shortages

Question 18

What questions do the economic problem lead to

Answer 18

1) What to produce?
2) How to produce it
3) Who to produce it for?

Question 19

Define Barter

Answer 19

a way of trading goods and services without money

Question 20

Define constraints

Answer 20

Limits to what we can afford to consume

Question 21

Define factor incomes

Answer 21

The reward to factors of production for example:

Labour receives wages
Land earns rent
Capital earns interest
Enterprise earns profit

Question 22

What are free goods?

Answer 22

Goods that are unlimited in supply and which therefore have no opportunity cost

Question 23

Define interest

Answer 23

The reward to the ownership of capital

Question 24

Define rationing

Answer 24

A way of allocating scare goods and services when market demand exceeds available supply

Question 25

How is scarcity a relative concept

Answer 25

They are only scarce in relation to the demands placed upon them

Question 26

Define Opportunity Cost

Answer 26

The value of the next best alternative forgone