Unit 1-Area of Study 1-Definitions

Question 1

Define:

Economics

Answer 1

Economics is the study of how to use limited resources to help make individuals and society better of in order to improve living standards

Question 2

Define:

Living Standards

Answer 2

Living standards refer to how well individuals live their daily lives in regard to material and non-material wellbeing

Question 3

Define:

Microeconomics

Answer 3

Microeconomics regards decision making by individual firms, households and industries

Question 4

Define:

Macroeconomics

Answer 4

Macroeconomics regards the workings of the economy as a whole, including the general influences on the levels of national spending, production and income

Question 5

Define:

Needs

Answer 5

Goods and services that are required by individuals or society to survive

Question 6

Define:

Wants

Answer 6

Goods and services that would make life more enjoyable but which are not essential for an individual or society

Question 7

Define:

Resources

Answer 7

Resources are the inputs used in the production of goods and services

Question 8

Define:

Efficiency

Answer 8

Efficiency relates to the level of output per unit of input. Higher efficiency means more production of goods and services is gained from the same or fewer resources

Question 9

Define:

Productive Capacity

Answer 9

Is the physical limit to a nation’s production of goods and services that results from the availability of resources

Question 10

Define:

Consumer Sovereignty

Answer 10

Is the ability of the consumer in a competitive market economy to direct or allocate resources

Question 11

Define:

Economic Choices

Answer 11

Involve decisions made by individuals/firms/governments about which needs and wants to satisfy, and what types of goods and services should be produced and bought

Question 12

Define:

Economic Growth

Answer 12

Occurs when a nation increases the volume of goods and services produced over a period of time

Question 13

Define:

GDP

Answer 13

Gross Domestic Product represents the total value of goods and services produced by a country, usually measured over a one year period

Question 14

Define:

Market Capitalism

Answer 14

Gross Domestic Product represents the total value of goods and services produced by a country, usually measured over a one year period

Question 15

Define:

Opportunity Cost

Answer 15

Cost of a particular choice or decision is equal to the benefit given up in one area of production,caused by a decision to direct resources into alternative use

Question 16

Define:

Poverty

Answer 16

Occurs when individuals have insufficient income to purchase basic goods and services and therefore do not enjoy reasonable living standards

Question 17

Define:

Private Enterprise

Answer 17

Or capitalism dominates in an economic system when individuals own most business and the means of production, rather than having a dominance of state ownership

Question 18

Define:

Relative Scarcity

Answer 18

Occurs when a nation has limited resources available for the production of goods and services, compared with people’s needs and wants that are virtually unlimited. Despite this, some resources are also relatively scarcer than others and this is reflected in price differences

Question 19

Define:

Subsidy

Answer 19

Is a cash payment made by the government to encourage those producing and/or consuming particular types of goods and services

Question 20

Define:

Market Structure

Answer 20

Relates to the type or strength of competition (for example, pure competition versus pure monopoly) found in different types of markets

Question 21

Define:

Market Power

Answer 21

Exists when a firm has much control or influence in a market (it is a price maker) because it has a monopoly or perhaps is an oligopoly

Question 22

Define:

Pure Competition

Answer 22

Occurs when there are many producers each selling a homogeneous product or service where there is no product differentiation

Question 23

Define:

Price Takers

Answer 23

Are firms operating in strongly competitive markets where they have no power to set the prices they receive

Question 24

Define:

Monopolistic Competition

Answer 24

Exists when there are quite a large number of firms, each producing a common product or service (such as jeans) but the good or service is distinguished by brand names and product differentiation

Question 25

Define:

International Competitiveness

Answer 25

Relates to whether a business or country is able to sell its goods and services profitably at prices that are below those for similar goods or services abroad

Question 26

Define:

Material Living Standards

Answer 26

Refer to how well off an individual or society is, when measured in terms of its income, production or consumption levels of goods and services, per person per year

Question 27

Define:

Demand

Answer 27

Represents the amount of a good or service that consumers are prepared to purchase at a given price

Question 28

Define:

Law of Demand

Answer 28

States that as the price of a particular good or service rises, the quantity demanded contracts, whereas if the price falls, the quantity demanded expands

Question 29

Define:

Supply

Answer 29

Represents the amount of a good or service that sellers are prepared to produce or sell at a given price

Question 30

Define:

Law of Supply

Answer 30

Represents the amount of a good or service that sellers are prepared to produce or sell at a given price

Question 31

Define:

Equilibrium Price

Answer 31

Unique price for a particular good or service that is determined in a market when the quantity demanded is exactly equal to the quantity supplied

Question 32

Define:

Relative Prices

Answer 32

Concept that compares the market prices of different products or resources

Question 33

Define:

Market Failure

Answer 33

Occurs when the free operation of the market system makes decisions that reduce the satisfaction of society’s wants, thereby lowering general living standards and wellbeing

Question 34

Define:

Oligopoly

Answer 34

Exists when the level of competition is limited because a few large firms control the output of an industry

Question 35

Define:

Monopoly

Answer 35

Occurs when competition in a particular industry or market is weak, and a single firm controls the output of an entire industry

Question 36

Define:

Inequality of Income

Answer 36

Is the wide gap between those Australians on high incomes and those on low incomes. Here, the income cake is divided unevenly and there are large differences in living standards