Definitions

Question 1

Fundamental economic problem

Answer 1

humans have unlimited wants but there are finite resources to provide the goods and services.
unlimited demand but finite supply

Question 2

scarcity

Answer 2

when the demand for a resource is greater than the supply

Question 3

opportunity cost

Answer 3

the value of the next best alternative foregone

Question 4

factors of production (FoP)

Answer 4

the resources used to produce goods and services. there are four factors, land, labour, capital, enterprise

Question 5

land

Answer 5

the physical space and the natural resources within it. eg river with fish

Question 6

labor

Answer 6

the people used to transform resources into goods and services available to purchase

Question 7

capital goods

Answer 7

a company’s physical equipment and machinery it uses to generate consumer goods and services.

Question 8

enterprise

Answer 8

individuals ideas, concept and emotional effort to produce a product or service to introduce into the economy. risk takers

Question 9

investment

Answer 9

an asset acquired with the goal of generating income or appreciation

Question 10

saving

Answer 10

the money that person has left over after they subtract out their spending from their income over a given time period

Question 11

interest

Answer 11

income earnt off capital.

Question 12

rent

Answer 12

fee charged for the use of a resource or asset.

Question 13

profit

Answer 13

the difference between the return and capital, labour and land

Question 14

production possibility frontier (PPF curve)

Answer 14

graph which shows the different combinations of outputs of two goods that can be produced using available factors of production efficiently.

Question 15

market economy

Answer 15

economic system which prices and production is determined by unrestricted competition between privately owned businesses

Question 16

mixed economy

Answer 16

economic system combining private and state enterprise

Question 17

command economy

Answer 17

economic system where the government dictates the levels of production and prices for goods and services.

Question 18

positive statement

Answer 18

statements that can be tested to be true or false using evidence.

Question 19

normative statement

Answer 19

statements which express an opinion about what ought to be

Question 20

effective demand

Answer 20

the willingness and the ability to purchase goods

Question 21

law of demand

Answer 21

consumer demand for a good rises as the price falls. vice versa

Question 22

income effect

Answer 22

change in consumption of goods based on income.

Question 23

substitution effect

Answer 23

decrease demand of a product as consumers switch to cheaper alternatives as price rises

Question 24

diminishing margin utility

Answer 24

Satisfaction and usefulness of each new unit of product acquired decreases.

Question 25

derived demand

Answer 25

demand for a good or service due to results from the demand of a different good or service

Question 26

composite demand

Answer 26

when a good has more than one use.

Question 27

latent demand

Answer 27

demand for a product that can satisfy a want which is unable to be satisfied by any existing product

Question 28

substitute good

Answer 28

product that consumers see as similar enough to another product.

Question 29

complementary good

Answer 29

a product or service used in combination with another product or service.

Question 30

normal good

Answer 30

good that increases in demand due to increase in consumer income

Question 31

inferior good

Answer 31

good that decreases in demand as consumer income rises

Question 32

ceteris paribus

Answer 32

all other things being equal

Question 33

gross domestic product (GDP)

Answer 33

measures the monetary value of goods and services produce within a country in a given time period.

Question 34

subsidy

Question 35

indirect tax

Question 36

subsidy

Question 37

fiscal deficit

Question 38

fiscal policy

Question 39

monetary policy

Question 40

national debt

Question 41

equitable

Question 42

cost push inflation

Answer 42

inflation caused by increases in the cost of important goods or services (decrease in AS) due to external factors

Question 43

demand pull inflation

Answer 43

prices rise when AD exceeds supply of available goods for sustained periods of time

Question 44

demand push inflation

Answer 44

increase in AD causing inflation.

Question 45

cost pull inflation

Answer 45

when AD remains the same but AS decreases due to external factors, causing a rise in price levels