Unit 1: The Basic Economic Problem

Question 1

Wants

Answer 1

Desires for goods and services

Question 2

Resources

Answer 2

Factors used to produce goods and services

Question 3

The economic problem

Answer 3

Unlimited wants exceeding finite resources

Question 4

Scarcity

Answer 4

A situation where there is not enough to satisfy everyone’s wants

Question 5

Economic good

Answer 5

A product which requires resources to produce it and therefore has an opportunity cost

Question 6

Free good

Answer 6

A product which does not require any resources to make it and so does not have an opportunity cost

Question 7

Factors of production

Answer 7

The economic resources of land, labour, capital, and enterprise

Question 8

Land

Answer 8

Gifts of nature available for production e.g. land, trees, water

Question 9

Labour

Answer 9

Human effort used in producing goods and services

Question 10

Capital/capital goods

Answer 10

Human-made goods used in production

Question 11

Consumer goods

Answer 11

Goods and services purchased by households for their own satisfaction

Question 12

Enterprise

Answer 12

Risk bearing and key decision making in business

Question 13

Occupationally mobile

Answer 13

Capable of changing use

Question 14

Geographically mobile

Answer 14

Capable of moving from one location to another location

Question 15

Mobility of labour

Answer 15

the ability of labour to change where it works or in which occupation

Question 16

Mobility of capital

Answer 16

the ability to change where capital is used or in which occupation

Question 17

Mobility of enterprise

Answer 17

The ability to change where enterprise is used or in which occupation

Question 18

Entrepreneur

Answer 18

A person who bears the risks and makes the key decisions in a business

Question 19

Labour force

Answer 19

People in work and those actively looking for work

Question 20

Productivity

Answer 20

The output per factor of production in an hour

Question 21

Labour productivity

Answer 21

Output per worker hour

Question 22

Output

Answer 22

Goods and services produced by the factors of production

Question 23

Investment

Answer 23

Spending on capital goods

Question 24

Gross investment

Answer 24

Total spending on capital goods

Question 25

Depreciation (capital consumption)

Answer 25

The value of capital goods that have worn out or become obsolete

Question 26

Net investment

Answer 26

Gross investment minus depreciation

Question 27

Negative net investment

Answer 27

A reduction in the number of capital goods caused by some obsolete and worn out capital goods not being replaced

Question 28

Opportunity cost

Answer 28

The next best alternative foregone (not taken)

Question 29

Production possibility curve

Answer 29

A curve that shows the maximum output of two types of products and combination of those products that can be produced with existing resources and technology