Unit 1 - 1.1 Understanding the nature of economics

Question 1

Social Sciences

Answer 1

Studies of people in society and how they interact with each other.
Examples include sociology, political science, psychology, anthropology, history, and economics.

Question 2

Microeconomics

Answer 2

The study of individual markets and sections of the economy rather than the economy as a whole. The different choice individuals, households and firms make and what factors influence their choices and how their decision effect price, demand and supply of goods/services in a market.

Question 3

Macroeconomics

Answer 3

Is the study of economic behaviour and decision making in the entire economy, rather than just an individual market.

Question 4

Scarcity

Answer 4

where available resources (land, labour, capital, entrepreneurship) are limited; they are not enough to produce everything that human being need and want.

Question 5

Choice

Answer 5

the study of choices or selecting among alternatives, due to the scarcity of resources. Economics studies the consequences of these choices present and future.

Question 6

Efficiency

Answer 6

a quantifiable concept, determined by the ratio of useful output to total input.

Question 7

Allocative Efficiency-

Answer 7

Hudson to check ok

making the best possible use of scarce resources to produce the combinations of goods and services that are optimum for society, and minimising resource waste.

Question 8

Equity

Answer 8

Hudson to check

Equity is the idea of being fair or just. Fairness has a different meaning from one person to the next. Not the same as equality which is the sameness.

Question 9

Sustainability

Answer 9

Meeting the needs of the present generation without compromising the ability of future generations to meet their own needs.

limiting the degree to which the current generation’s economic activities create harmful environmental outcomes involving resource depletion that will negatively affect future generations

Question 10

Change

Answer 10

the economic world is continuously changing and economists must adapt their thinking accordingly

Question 11

Interdependence

Answer 11

Individuals, communities and nations are not self sufficient. Consumers, companies, households, workers, and governments, all economic actors, interact with each other

Question 12

Intervention

Answer 12

Refers to government intervention, meaning that the government becomes involved with the workings of markets.

Question 13

Resources

Answer 13

Factors of production, used by firms as inputs in the production process.

Question 14

Factors of production

Answer 14

are the resources used to produce goods and services

Land, labour, capital and enterprise

Question 15

Economics

Answer 15

Economics is the study of choices leading to the best possible use of scarce resources in order to best satisfy unlimited human needs and wants.

Question 16

Sustainable Resource Use

Answer 16

Refers to the preservation of the environment over time.

Question 17

Land

Answer 17

The physical factor of production. It consists of natural resources, including agricultural and non agricultural land as well as everything that is under and above the land, such as minerals, oil reserves, underground water, forests, rivers and lakes.

Natural resources are also called ‘gifts of nature’.

Some of which are renewable (for example, wheat) and some of which are non-
renewable (for example, iron ore).

Question 18

Labour

Answer 18

The human factor of production. It is the physical and mental effort that people contribute to the production of goods and services.

Question 19

Capital

Answer 19

Capital is any man-made resource that is used to produce goods/services

Physical capital - machinery, tools, factories, buildings, road systems, airports, and harbours.

Human Capital - skills, abilities, knowledge and levels of good health acquired by people.

Question 20

Entrepreneurship/ Enterprise

Answer 20

Enterprise involves taking risks in setting up or running a firm. An entrepreneur decides on the combination of the factors of production necessary to produce goods/services with the aim of generating profit

Question 21

Human Captial

Answer 21

The skills, abilities and knowledge acquired by people as well as the good levels of health, all of which make them more productive.

Question 22

Opportunity Cost

Answer 22

Is the loss of the next best alternative when making a decision

Question 23

Free Good

Answer 23

Any good that is not scarce and therefore has zero opportunity costs. Oxygen, sunlight, sea water

Question 24

Economic Wellbeing

Answer 24

relating to the level of prosperity and quality of living standards enjoyed by members of an economy.
It includes
♣ present and future financial security
♣ the ability to meet basic needs
♣ the ability to make economic choices permitting achievement of personal satisfaction
♣ the ability to maintain adequate income levels over the long term

Question 25

What are the 9 central concepts

Answer 25

Question 26

Free market economic system

Answer 26

a market with no government intervention

Question 27

Basic economic problem

Answer 27

Resource are scarce

There are finite resources available in relation to the infinite wants and needs that humans have

Needs are essential to human life e.g. shelter, food, clothing

Wants are non-essential desires e.g. better housing, a yacht etc.

Due to the problem of scarcity, choices have to be made by producers, consumers, workers and governments about the best (most efficient) use of these resources

Economics is the study of scarcity and its implications for resource allocation in society

Question 28

Economic Goods

Answer 28

are scarce in relation to the demand for them

This makes them valuable

Due to their value, producers will attempt to supply them in order to make a profit

Anything that has a price tag on it is an economic good e.g. oil, corn, gold, trainers, watches and bicycles