Unit 1

Question 0

Define ‘Opportunity Cost’

Answer 0

The benefit lost from the next best alternative

Question 1

Define ‘the economic problem’

Answer 1

The worlds resources are scarce but there are infinite uses for them

Question 2

What is a F.O.P?

Answer 2

F.O.P stands for factors of production. The resource inputs that are available in an economy for the production of goods and services.

Question 3

Name 4 F.O.Ps

Answer 3

C-apital
E-ntrepreneur
L-abour
L-and

Question 4

What does the ‘Production Possibility Curve’ show?

Answer 4

It shows the maximum quantities of different combinations of output of two products given current resources and the state of technology

Maximum amount that can be produced from societies scarce resources

Question 5

Define ‘Specialisation’

Answer 5

The concentration by worker or workers, firms regions or whole economy on a narrow range of products

Question 6

Name 3 benefits of specialisation

Answer 6

1) An increase in the output of goods and services
2) A widening range of goods and services
3) workers more skilled which can lead to higher wages

Question 7

Name 4 disadvantages of specialisation

Answer 7

Finite resources

De-industrialisation

Bad weather

Tastes

Question 8

Define ‘Market’

Answer 8

A market is when or where buyers and sellers meet to trade or exchange products

Question 9

Define ‘Demand’

Answer 9

Demand is the quantity of a product that consumers are willing and able to buy at a given price over a period of time

Question 10

What is PED and define it.

Answer 10

PED stands for Price Elasticity of Demand

It is the responsiveness of the quantity demanded to the change in price.

Question 11

If quantity demanded is responsive to a change in price, what is it known as?

Answer 11

Price elastic

Question 12

If quantity demanded is unresponsive to a change in price what is it known as?

Answer 12

Price inelasticity.

Question 13

Name 5 factors that determine price elasticity of demand

Answer 13

Availability of substitutes

Luxuries & necessities

Proportion of income spent on good

Time period

Habit forming goods

Question 14

Name 9 causes of changes in demand

Answer 14

Changes in disposable income
Changes in the price of substitutes
Changes in the price of complimentary goods
Changes in taste and fashion
Changes in population
Changes in income distribution 
Changes in weather
Changes in legislation
Advertising

Question 15

Define consumer surplus

Answer 15

The additional amount that a consumer is willing to pay for a product above the price that is actually paid

Question 16

Define supply

Answer 16

The quantity of a product that producers are willing and able to provide over a period of time

Question 17

Define producer surplus

Answer 17

The difference between the price that a firm is willing to supply a product at and what is actually paid

Question 18

What is PES& define the term.

Answer 18

PES stands for price elasticity of supply and measures the responsiveness of the quantity supplied to a change in the price of a product.

Question 19

Name 5 causes for change of supply

Answer 19

Cost of production
Price of other goods
Technology
Weather
Expectations

Question 20

State 5 factors that determine price elasticity of supply

Answer 20

Availability of substitutes
Availability of stocks
Availability of factors of production
Time period
Factor mobility