Theme 1 - Scarcity And Choice

Question 1

Macroeconomics

Answer 1

The study of the inter relationships between economic variables at an aggregate (economic wide) level

Question 2

Microeconomics

Answer 2

The study of the economic decisions taken by individual economic agents, including households, firms and the government

Question 3

Positive statement

Answer 3

A statement about what is (I.e.) about facts

Question 4

Normative statement

Answer 4

A statement involving a value judgement that is about what ought to be

Question 5

Ceteris paribus

Answer 5

A Latin phrase meaning ‘other things being equal’ it is used in economics when we focus on changes in one variable while holding other influence constant

Question 6

Scarcity

Answer 6

A situation that arises because people have unlimited wants in the face of limited resources

Question 7

Needs

Answer 7

Things that are essential to human survival

Question 8

Wants

Answer 8

The things that we desire over and above our basic needs

Question 9

Opportunity costs

Answer 9

In decision making, the value of the next best alternative foregone

Question 10

Marginal analysis

Answer 10

An approach to economic decisions making based on considering the additional ( marginal ) benefits and costs of a change in behaviour

Question 11

Economic agents

Answer 11

Economic decision makers such as households, firms and the government

Question 12

A free good

Answer 12

A good which is unlimited in supply, hence it is not scarce

Question 13

An economic good

Answer 13

A good which is scarce in supply

Question 14

Factors of production

Answer 14

Resources used in the production process; inputs into production including capital, enterprise, land and labour

Question 15

Land

Answer 15

Land itself, plus all things produced by earth and those which exist below the earth, in the sea or in the air. Land is a natural resource

Question 16

Labour

Answer 16

All human effort used in production. Labour is a human resource

Question 17

Capital

Answer 17

All man made aids to production - plant, machinery, factory buildings, tools and transport equipment. Capital is a physical resource.

Question 18

Enterprise

Answer 18

The initial idea and risk taken. It draws together all the other 3 factors of production

Question 19

Entrepreneur

Answer 19

Someone who organises production and identifies projects to be undertaken, bearing the risk of the activity

Question 20

Renewable resources

Answer 20

Natural resources that can be replenished such as forests that can be replanted or solar energy

Question 21

Non renewable energy

Answer 21

Natural resources that once used cannot be replenished, such as coal or oil

Question 22

Economic model

Answer 22

A simplified representation of reality used to provide insight into economic decisions and events

Question 23

Production possibilities frontier

Answer 23

A curve showing the maximum combinations of goods or services that can be produced in a set period of time given available resources

Question 24

A trade off

Answer 24

A giving up of one thing in exchange for gaining another. It relates to the concept of opportunity costs, and the sacrifices of one type of good or service to gain more of another

Question 25

Economic efficiency

Answer 25

A situation in which both productive and allocative efficiency have been achieved

Question 26

Allocative efficiency

Answer 26

Achieved when consumer satisfaction is maximised

Question 27

Productive efficiency

Answer 27

Attained when a firm operates at maximum average total costs, choosing an appropriate combination of inputs and producing the maximum output possible from those inputs

Question 28

Consumer goods

Answer 28

These are goods which are consumed or used up by us when we buy them. They are for present use

Question 29

Capital goods (or producer goods)

Answer 29

These are goods manufactured for the purpose of producing other goods. They increase the future capacity of the economy and are known as investment

Question 30

Potential economic growth

Answer 30

An expansion in the productive capacity of the economy

Question 31

Gross domestic product (GDP)

Answer 31

A measure of the economic activity carried out in the economy during a period of time

Question 32

Division of labour

Answer 32

A process whereby the production procedure is broken down into a sequence of stages, and workers are assigned particular stages

Question 33

Specialisation

Answer 33

The concentration by a worker or workers, firm, region or whole economy on a narrow range of goods and services

Question 34

Market

Answer 34

A set of arrangements that allow transactions to take place

Question 35

Barter

Answer 35

Exchange goods and services for other goods and services without using money