The economic problem

Question 1

Scarce resources

Answer 1

Resources that are limited in supply so that choices have to be made about their use.

Question 2

Scarcity

Answer 2

Scarce means limited. There is only a limited amount of resources available to produce the unlimited amount of goods and services we desire.

Question 3

Economic goods

Answer 3

Good that are scarce because their use has an opportunity cost.

Question 4

Free goods

Answer 4

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

Question 5

Wants

Answer 5

Desires for the consumption of goods and services.

Question 6

Needs

Answer 6

The minimum that is necessary for a person to survive as a human being.

Question 7

Basic economic problem

Answer 7

There are infinite wants but finite factor resources with which to satisfy them

Question 8

Opportunity cost

Answer 8

The benefits forgone of the next best alternative.

Question 9

What three parts do economists distinguish to the economic problem?

Answer 9

WHAT is to be produced?
HOW is production organised?
For WHOM is production to take place?

Question 10

Factors of production

Answer 10

land
labour
capital
enterprise

Question 11

Land

Answer 11

As a factor of production, is all natural resources.

Question 12

Non-renewable resources

Answer 12

Resources such as coal or oil, which once exploited cannot be replaced.

Question 13

Renewable resources

Answer 13

Resources, that can be exploited over and over again because they have the potential to renew themselves. Examples are fish stock, forest or water.

Question 14

Scarce resources

Answer 14

Resources that are limited in supply so that choices have to be made about their use.

Question 15

Sustainable resources

Answer 15

Renewable resource that is being economically exploited in such a way that it will not diminish or run out.

Question 16

Labour

Answer 16

As a factor of production is the workforce.

Question 17

Human capital

Answer 17

The value of the productive potential of an individual or group or workers; it is made up of the skills, talents, education and training of an individual or group and represents the value of future earnings and production.

Question 18

Capital

Answer 18

As a factor of production is the stock

Question 19

State the two types of capital

Answer 19

Working or circulating capital
Fixed capital

Question 20

Working or circulating capital

Answer 20

Resources that are in the production system waiting to be transformed into goods or other materials before being finally sold to the consumer.

Question 21

Fixed capital

Answer 21

Economic resources such as factories and hospitals which are used to transform working capital into goods and services.

Question 22

Enterprise or entrepreneurship

Answer 22

As a factor of production is the seeking out of profitable opportunities for production and taking risks in attempting to exploit these.

Question 23

Entrepreneur

Answer 23

Individuals who seek out profitable opportunities for production and take risks in attempting to exploit these.