The Economic Problem

Question 1

The Economic Problem

Answer 1

Humans have unlimited wants, yet we have limited resources

Question 2

Opportunity Cost

Answer 2

The sacrifice of the next best alternative when using resources

e.g. If I have £500 and want to buy a TV or a Laptop, If ic choose to buy the TV I can no longer use my disposable income to buy the Laptop, therefore the laptop is the opportunity cost of buying the TV

Question 3

Free Goods

Answer 3

Goods that have zero opportunity cost e.g. the air we breath

Question 4

4 Factors of Production

Answer 4

The maint types of resources used to make goods and services:

Land - Any naturally occurring resource that can be used to satisfy economic wants e.g. All mineral deposits

Labour - The human effort used to make goods and services

Capital - A man made resource used to make goods and services e.g. machinery

Enterprise - The skill of combining the other 3 factors of production, also known as entrepreneurship.