Unit 1.1: Introduction To Economics

Question 1

Factors of production

Answer 1

Capital: man-made resources

Entrepreneurship: skills required to successfully combine, organise and manage capital, land and labour

Land: natural resources

Labour: human resources (physical & mental effort of people)

Question 2

Basic economic problem line

Answer 2

Free market Mixed economy Controlled economy
<————————————————————————————————>
Consumers Consumers, Govenment
& producers producers and
Government

Question 3

Opportunity cost

Answer 3

Highest value alternative foregone when making a decision
(Whatever is given up to do something else)

Question 4

Ceteris paribus

Answer 4

When all else are held constant
(Other factors are held constant when looking at the relationship between variables)

Question 5

Scarcity

Answer 5

The situation in which resources are finite whereas wants are infinite

Question 6

Rewards for factors of production

Answer 6

Land - rent
Labour - wage / salaries
Capital - interest; money can be borrowed for production and consumption purposes in oorder to purchase the capital equipment
Enterprise - profit