Unit 1 Vocab

Question 1

Factors of production

Answer 1

anything that is useful in the production of goods (land, labor, capital)

Question 2

Production

Answer 2

the process of creating goods and services in an economy

Question 3

Investment

Answer 3

the creation of capital goods

Question 4

Liabilities

Answer 4

debt obligations

Question 5

Resources

Answer 5

inputs available for the production of goods and services

Question 6

Wants

Answer 6

needs that are not always realised

Question 7

Scarcity

Answer 7

a situation in which wants and needs are in excess of the resources available

Question 8

Fundamental Economic Problem

Answer 8

scarce resources relative to unlimited wants

Question 9

Land

Answer 9

Natural resources used in production

Question 10

Labor

Answer 10

Human Resources used in production

Question 11

Capital

Answer 11

man-made aid in production

Question 12

Entrepreneur

Answer 12

organizes production and is willing to take risks

Question 13

Consumption

Answer 13

process by which consumers satisfy their wants

Question 14

Positive Statement

Answer 14

one that is based on empirical or actual evidence

Question 15

Normative Statement

Answer 15

one that is subjective about what should happen

Question 16

Specialization

Answer 16

the process by which individuals, firms and economies concentrate on producing those goods and services where they have an advantage over others

Question 17

Planned Economy

Answer 17

one where resources allocation decisions are taken by a central body

Question 18

Liquidity

Answer 18

the extent to which there is an adequate supply of assets that can be turned into cash

Question 19

Opportunity cost

Answer 19

The cost expressed in terms of the best alternative that is forgone

Question 20

Short run

Answer 20

time period when a firm can only change some and not all factor inputs

Question 21

Long run

Answer 21

time period when all factors of production variables

Question 22

Very long run

Answer 22

time period when all key inputs into productions are variables

Question 23

Market

Answer 23

where the buyers and sellers get together to trade

Question 24

Division of Labor

Answer 24

Where a manufacturing process is split into a sequence of individual tasks

Question 25

Economic structure

Answer 25

the way in which an economy is organised in terms of sectors

Question 26

Economic System

Answer 26

the means by which choices are made in an economy

Question 27

Market (Free) Economy

Answer 27

one where most decisions are taken through market forces (individually owned)

Question 28

Mixed Economy

Answer 28

one where market forces and government, private and public sectors are involved in resource allocation decisions

Question 29

Market Mechanism

Answer 29

where decisions on price and quantity are made on the basis of demand and supply alone

Question 30

Production Possibility Curve

Answer 30

a simple representation of the maximum level of output that an economy can achieve when using its existing resources

Question 31

Reallocation of resources

Answer 31

where resources are deliberately moved from one product to another

Question 32

Factor Mobility

Answer 32

the ease by which factors of production can be moved around

Question 33

Economic Growth

Answer 33

represented by a shift outwards of the production possibility curve

Question 34

Capital Consumption

Answer 34

The capital required to replace that which is worn out

Question 35

Developing Economy

Answer 35

one that has a low income per head

Question 36

Money

Answer 36

Any item that is generally acceptable to sellers in exchange for goods and services

Question 37

Near Money

Answer 37

non-cash assets that can be quickly turned into cash

Question 38

Choice

Answer 38

underpins the concepts that resources that resources are scare so choices have to be made by consumers, firms and governments