Theme 1: Nature Of Economics

Question 1

economic problem

Answer 1

Managing finite resources with unlimited wants

Question 2

What is opportunity cost

Answer 2

The opportunity cost of a decision is the next best alternative that you give up in making a decision

Question 3

What was Adam smiths philosophy

Answer 3

-Traditional free market economic theory
-consumers and producers self interest
- low barriers to entry
- specialisation and division of labour

Question 4

Karl Marx

Answer 4

-critical of free market
-profit maximising is exploitative

Question 5

What was Freidruch Hayek philosophy

Answer 5

• keen supporter of free market system
• individual consumers best knowledge price mechanism

Question 6

Pros cons free market economy

Answer 6

Pros
-efficiency
-entrepreneurship
-choice
Cons
-inequalities
-non profitable goods may not be made
-monopolies

Question 7

Pros cons of command economy

Answer 7

-maximise welfare
-low unemployment
-prevent monopolies

Cons
-poor desicion making
-restricted choice
-lack of risk taking efficiency