1.1, 1.2

Question 1

the economic problem

Answer 1

unlimited needs and wants but limited resources leading to scarcity

Question 2

need

Answer 2

good or service essential for livjg

Question 3

want

Answer 3

good or service people would like to have but isn’t essential for living

Question 4

factors of production

Answer 4

labour land enterprise capital

Question 5

opportunity cost

Answer 5

when another best item is given up by choosing another item

Question 6

specialization

Answer 6

occurs when people or businesses concentrate on what they’re best at

Question 7

added value

Answer 7

difference between the selling price of a product and the cost of brought in materials

Question 8

added value allows business to what?

Answer 8

1) pay other costs (labour, management expenses, advertising)
2) may be able to make profit , if costs come to a total less than added value

Question 9

how to add value

Answer 9

1) increase the price of product while keeping cost of materials the same
2) reduce cost of materials while keeping price the same

Question 10

division of labour advantage

Answer 10

• workers are trained in one task (specializes in it - increasing efficiency)
• less time moving from one workbench to another
• quicker and cheaper to train workers as fewer skills need to be taught

Question 11

division of labour disadvantages

Answer 11

• workers become bored from doing one job
• if worker is absent, no one else specialises in their works (production could stop)

Question 12

business

Answer 12

an organization that produces good and services to satisfy customer needs and wants

Question 13

primary sector

Answer 13

first stage of production process, involves extraction of raw materials

Question 14

secondary sector

Answer 14

second stage of production process, involves manufacturing of goods using raw materials

Question 15

tertiary sector

Answer 15

last stage of production process, provides services to consumers (transport,etc)

Question 16

less developed economy

Answer 16

• primarily focuses on primary sector (most people r employed in agriculture and food production)
• employment in primary sector is high
  (due to lower participation rates in education and lack of infrastructure to support manufacturing)

Question 17

emerging economy

Answer 17

• improving technology
  = less labour needed in primary sector
  = more in manufacturing

Question 18

developed economy

Answer 18

• high proportion of workforce employed in service provision
• use their wealth to find better education and skills training

Question 19

deindustrialisation

Answer 19

• decline in the importance of manufacturing sector in a country

Question 20

public sector

Answer 20

business controlled by government
- usually to provide a service

Question 21

private sector

Answer 21

business controlled by other firms and private individuals, aims for profit
high level of productivity - efficient
business ownership varies from sole traders to partnerships

Question 22

privatisation

Answer 22

when government controlled firms are sold to private sectors

(most of the time government retains a share in them to influence decision making and receive share of profits)

Question 23

nationalisation

Answer 23

when government takes over private businesses
happens during a recession (loss of important jobs and tax)

Question 24

why industrialisation and deindustrialisation happens

Answer 24

-due to depletion of natural resources
-loss of competitiveness due to newly industrialised countries
-increase in total wealth leads to rise in living standards

Question 25

why public firm exists

Answer 25

ensure public service provision, security, job creation, and provide economic growth

Question 26

3 sectors are compared by

Answer 26

1) percentage of country’s total number of workers employed in each sector 2) value of outputs of good and services , proportion of national output

Question 27

public sector advantage

Answer 27

- important industries are controlled by government - ensures customers not taken advantages by private sector - keep businesses open and job employment - non profitable industries

Question 28

public sector disadvantage

Answer 28

- no private shareholders to insist on high profit or efficiency - no close competition : lack of motivation to increase demand or efficiency - government can use business for political reasons

Question 29

private sector advantages

Answer 29

- high efficiency and lower average costs - encouraged competition = lower prices - increase of developing good quality products

Question 30

private sector disadvantages

Answer 30

- could produce harmful good due to profit motive (drugs) - workers may lose jobs as they don’t care about employment rates - negative externalities (pollution may increase, etc)

Question 31

market economy

Answer 31

economic decisions and price of goods/services are guided by country’s individual citizens or business

Question 32

market economy advantages

Answer 32

- there is competition = more efficient - innovation is encouraged (creating new ideas for business) - large variety of goods are made available - economic activity encouraged - freedom of choice

Question 33

market economy disadvantages

Answer 33

- large difference in wealth - environmental damage due to no government - reduced social safety net - poor working conditions - lack of public goods and services being produced

Question 34

command economy

Answer 34

a central government authority dictates the level of production that are permissible and price that may be charged for goods and services

Question 35

mixed economy

Answer 35

- economic system combining private and public sectors