What is Economics?

Question 1

What is Economics?

Answer 1

The study of how people choose to use resources

Question 2

What is scarcity?

Answer 2

Excess of human wants over what can be produced, everyone (individual/group/government) must make choices

Question 3

What are opportunity costs?

Answer 3

It is the value of the best alternative forgone. Choices involve sacrifices

Question 4

What is at the centre of Economics?

Answer 4

Demand and supply

Question 5

What is demand related to?

Answer 5

Unlimited wants and consumption

Question 6

What is supply related to?

Answer 6

Limited resources and production

Question 7

What are the 4 factors of production?

Answer 7

Labour, land, capital and entrepreneurship

Question 8

What is labour?

Answer 8

Human Resources. When people make a product or deliver a service, eg lecturer teaching in a seminar

Question 9

What is land?

Answer 9

Natural resources. Eg place of a firm, raw materials

Question 10

What is capital?

Answer 10

Manufactured resources. It combines land and labour, eg building a university

Question 11

What is entrepreneurship?

Answer 11

Individuals who create business

Question 12

What are the key economic questions?

Answer 12

What is to be produced?
How to produce?
Who to produce for?

Question 13

What are the 3 economic systems?

Answer 13

Planned (command) economy, free market economy and mixed economy

Question 14

What is a planned economy?

Answer 14

Government allocates/decides everything

Question 15

What is a free market economy?

Answer 15

Resources allocated by supply and demand. There is no government

Question 16

What is a mixed economy?

Answer 16

Mixture of planned economy and free market economy

Question 17

What is positive economics?

Answer 17

A testable theory

Question 18

What is normative economics?

Answer 18

An opinion

Question 19

What is microeconomics?

Answer 19

Focuses on what happens in a particular market, eg the price of houses

Question 20

What is macroeconomics?

Answer 20

Focuses on the economy as a whole, eg the general price levels (gdp)

Question 21

What are goods?

Answer 21

Physical products

Question 22

What are services?

Answer 22

Intangible, eg customer care

Question 23

What are products?

Answer 23

Includes goods, services and a combo of both

Question 24

What are consumer goods?

Answer 24

Products consumed by the final user

Question 25

What are capital goods?

Answer 25

Products bought to use in the production process

Question 26

What is consumption?

Answer 26

Income of households spent on buying products

Question 27

What are savings?

Answer 27

Income of households not spent on buying products

Question 28

What are investments?

Answer 28

Money spent on capital goods

Question 29

What is the private sector?

Answer 29

Made up of organisations owned by firms and individuals

Question 30

What is the public sector?

Answer 30

Made up of organisations run by the government

Question 31

What is an economic model?

Answer 31

A simplified version of a more complex reality, irrelevant details are not taken into account, used if there is a financial crisis

Question 32

What is a rational choice?

Answer 32

Involves weighing up the benefit of action against its opportunity costs

Question 33

What does marginal mean?

Answer 33

The cost/benefit of adding 1 more unit

Question 34

What are real values?

Answer 34

Take account for inflation and are adjusted

Question 35

What are nominal values?

Answer 35

The values at their current prices