Topic 1

Question 1

Economics Definition

Answer 1

Social science which studies society and the economic behavior and relationships between individuals and groups.

Question 2

Basic Economic Problem Definition

Answer 2

Study of how scarce resources are used to satisfy needs and wants.

Question 3

Capital Definition

Answer 3

Money, machinery, equipment and tools owned and used by a business.

Question 4

Entrepreneurship/Enterprise Definition

Answer 4

Taking risks, being creative, innovative and use your initiative.

Question 5

Land Definition

Answer 5

All earth’s natural resources.

Question 6

Labour Definition

Answer 6

All potential workforce and their ability and effort.

Question 7

Scarcity Definition

Answer 7

Choices have to be made about how scarce resources are allocated between different users.

Question 8

Oppurtunity Cost Definition

Answer 8

Cost of giving up the next best alternative when a decision is made.

Question 9

Economic Good Definition

Answer 9

Goods that are scarce and therefore involve oppurtunity cost.

Question 10

Free Good Definition

Answer 10

Goods which have no oppurtunity cost such as air, sunshine and sea water.

Question 11

Production Definition

Answer 11

A process that converts inputs into output of goods.

Question 12

Capital Good Definition

Answer 12

A good which is used in the production of other goods or services, also known as a producer good.

Question 13

Consumer Good Definition

Answer 13

A good which is consumed by individuals or households to satisfy their needs or wants.

Question 14

Factors of Production Definition

Answer 14

Inputs into the production process, such as land, labour, capital and enterprise.

Question 15

Need Definition

Answer 15

Something necessary for human survival.

Question 16

Want Definition

Answer 16

Something people would like to have but is not essential for survival.

Question 17

Production Possibility Frontier(PPF)

Answer 17

A curve showing the various combinations of 2 products that can be produced when all the available resources are fully and efficiently employed

Question 18

Causes of an inward shift of PPF

Answer 18

Effects of natural disaster, economic damage caused by war, large scale net migration out of a country or a fall in productivity of labour resources.

Question 19

Causes of an outward shift of PPF

Answer 19

Improvements in productivity and efficiency, more factors of production available, better management of existing resources, excessive resource extraction, discovery of new natural resource or innovation and technology improves output.

Question 20

Resource Allocation Definition

Answer 20

The process through which the available factors of production are assigned to produce different goods and services.

Question 21

Positive Statement Definition

Answer 21

A statement of fact that can be scientifically tested to see if it is correct or not.

Question 22

Normative Statement Definition

Answer 22

A statement that includes a value judgement or view and cannot be scientifically tested.

Question 23

Economic Welfare Definition

Answer 23

The economic well being of an individual, group within society or an economy.

Question 24

Production Efficiency Definition

Answer 24

This occurs for the economy as a whole when it is impossible to produce more of one good without producing less of another.

Question 25

Allocative Efficiency Definition

Answer 25

Occurs when the available economic resources are used to produce the combination of goods and services that best matched people’s tastes and preferences.

Question 26

Market Economy Definition

Answer 26

Where goods and services are purchased through the price mechanism in a system of markets.

Question 27

Planned(or command) Economy Definition

Answer 27

Where economic resources are allocated by government officials and planners to firms and other productive enterprises.

Question 28

Mixed Economy Definition

Answer 28

Contains both a large sector and a large non-market sector in which the planning mechanism operates.

Question 29

Pure Market Economy Definition

Answer 29

Where the price mechanism performs the central economic task of allocating scarce resources among competing uses through the markets which make up the economy.

Question 30

Complete Command Economy Definition

Answer 30

An economy in which all decisions about what, how, how much, when, where and for whom to produce are taken by a central planning authority to all households and producers in the society.