Unit 4

Question 1

Define capital goods.

Answer 1

Capital goods are goos which are used in the production of other goods such as factories, offices, roads, machines and equipment.

Question 2

What are consumer goods?

Answer 2

Consumer goods are goods and services that used by people to satisfy their needs and wants.

Question 3

Define margin.

Answer 3

A margin is a point of possible change.

Question 4

What is a production possibility frontier?

Answer 4

The production possibility frontier is a curve which shows the maximum potential level of output of an economy. It shows the different combinations of goods which an economy is able to produce if all resources are fully and efficiently employed.

Question 5

How is economic growth and decline shown by the PPF?

Answer 5

An increase in the productive potential of the economy; economic growth is shown by a shift outwards of the PPF.

A decrease in the productive potential of the economy; economic decline is shown by an inward shift of the PPF.

Question 6

Why may growth occur in an economy? (2)

Answer 6

1) The quantity of resources available fro production increases, for instance there might be an increase in the number of workers in the economy, or new factories and offices might be built.
2) There may be an increase in the quality of resources, education will make workers more productive whilst technical progress will allow machines and production processes to produce more with the same amount of resources.