The Economic Problem

Question 1

Who are economic agents (3)?

Answer 1

1) Consumers.
2) Producers.
3) Governments.

Question 2

What are finite resources?

Answer 2

Resources that are limited, e.g. food, water, oil and land.

Question 3

What are economic goods?

Answer 3

Resources that are scarce.

Question 4

What is the basic economic problem?

Answer 4

How to fulfil unlimited consumer wants with limited resources - the issue of scarcity.

Question 5

What are the 4 factors of production?

Answer 5

1) Land.
2) Labour.
3) Capital.
4) Enterprise.

Question 6

What are renewable resources?

Answer 6

Resources that can be replenished. E.g. electricity and water.

Question 7

What are non-renewable resources?

Answer 7

Resources that cannot be replaced once used. E.g. coal and gold.

Question 8

What is opportunity cost?

Answer 8

The benefits forgone of the next best alternative when a decision is made.

Question 9

What is an example of an opportunity cost?

Answer 9

If a firm chooses to use its profits to invest in securities instead of in capital goods, they forsake the potential profits generated by more efficient production.