Topic 1: What is Economics Test Revision

Question 1

Land resources

Answer 1

Resources found in nature and that can be used in the production process to generate more elaborate products or consumed in their raw form

Question 2

Labour resources

Answer 2

The mental and physical effort exerted by humans in the production process

Question 3

Capital resources

Answer 3

Refers to those resources that have been made by combining labour and natural resources to create a more sophisticated input in the production process (eg. Machinery)

Question 4

Enterprise resources

Answer 4

The skills of those individuals who combine our resources to produce goods and services.

Question 5

Define a ‘Need’

Answer 5

Essential goods and services that humans need in order to achieve a basic standard of living

Question 6

Define a ‘Collective want’

Answer 6

To satisfy the needs of society as a whole. For example libraries and roads

Question 7

Define a ‘Want’

Answer 7

Provide us with a level of satisfaction and helps support the lifestyle or standard of living that we aspire to

Question 8

Define ‘Individual wants’

Answer 8

To satisfy the personal desires of individuals

Question 9

Define ‘Complementary wants’

Answer 9

Two goods that a consumer uses together. For example a car and fuel

Question 10

Define a ‘Good’

Answer 10

Physical items of value that are traded (eg: cars, milk, iPhones)

Question 11

Define a ‘Service’

Answer 11

Non-physical items of value that are traded, eg: education, haircuts, healthcare

Question 12

Define ‘Economics’

Answer 12

The social study of how people and society choose to use limited resources to fufill their needs and unlimited wants

Question 13

Define ‘Opportunity cost’

Answer 13

What you have to forgo if you choose to do A rather than B; the value of the alternative that is foregone whenever a choice is made

Question 14

What is a Productivity Possibility Curve

Answer 14

A tool used by economists to show how opportunity costs arise when individuals or the community make choices. It is often used to demonstrate the concept of opportunity cost

Question 15

Define and describe the use of ‘Factors of Production’

Answer 15

Used to produce goods and services that satisfy needs and wants. The 4 economic resources are land, labour, capital and enterprise

Question 16

Define ‘Consumer Goods’

Answer 16

Items produced for the immediate satisfaction of individual and community needs and wants

Question 17

Define ‘Capital goods’

Answer 17

Items that have not been produced for immediate consumption but will be used for the production of other goods

Question 18

What is the ‘Economic problem’ ?

Answer 18

The economic problem is scarcity - Having unlimited needs and wants, but limited resources that can be used to achieve them

Question 19

Define ‘Economic growth’

Answer 19

The increase in the quantity of goods and services produced in an economy over a period of time

Question 20

Define ‘Sustainable development

Answer 20

Development that meets the needs of the present without compromising the ability of future generations to meet their own needs. Sustainable development values resources for their future and current uses

Question 21

Define a ‘Reoccuring want’

Answer 21

Wants that are never satisfied and keep recurring

Question 22

Define ‘Inflation’

Answer 22

When the general price level of prices paid for goods and services increases over a certain period of time

Question 23

Define ‘Unemployment’

Answer 23

The percentage of people who are in the labour force who are unemployed

Question 24

Define ‘Interest rates’

Answer 24

The amount a borrower must pay a lender for the use of assets such as money. Usually expressed as a percentage of the total amount borrowed

Question 25

Define ‘Externalities’

Answer 25

The costs or the benefits received by a third party, where the third party does not have control over the costs or benefits.

Question 26

Distinguish the difference between ‘A good’ and a ‘Service’

Answer 26

A good is a tangible or physical product that someone will buy, a service is when you pay for a skill. A service is intangible, which can’t be physically touched or stored.

Question 27

Define a ‘Monteray cost’

Answer 27

Monetary cost is a easily measurable financial costs. Any cost associated with the production of goods and services; rents, taxes, utilities, gas.

Question 28

Define a ‘Non- Monetary cost’

Answer 28

Non-monetary costs are the things that cost you personally, but not your bank account. Non-monetary costs are measured in units other than money. These costs could be time, convenience, or even effort.

Question 29

Define a ‘Positive externality’

Answer 29

When consuming or producing a good causes benefit to a third party

Question 30

Define a ‘Negative externality’

Answer 30

When consuming or producing a good causes a cost to a third party

Question 31

Define ‘Utility’

Answer 31

Utility = Benefit, satisfaction or value

Question 32

Define ‘Marginal’

Answer 32

Marginal = Incremental or additional

Question 33

Define ‘Marginal utility’

Answer 33

Marginal utility = The incremental satisfaction derived from each additional product consumed

Question 34

Define and explain the use of a ‘CBA’

Answer 34

It is a technique that attempts to set out and evaluate the social costs and benefits of an investment project