1 Economic problem

Question 1

Which types of statements are there?

Answer 1

Positive and Normative

Question 2

Define economic welfare

Answer 2

the standard of living or general well-being of people in the society

Question 3

Factors of production

Answer 3

Land, labour, capital, enterprise

Question 4

What is basic economic problem?

Answer 4

Scarcity compared with society’s unlimited wants

Question 5

Define opportunity cost

Answer 5

the cost of the next best alternative that you give up when you have to make a choice

Question 6

How does PPF look like?

Answer 6

y- axis = consumer goods; x-axis = capital goods

Question 7

Factors that cause PPF to shift outwards

Answer 7

-technological improvements
-discovery of new resources
-improvements in education and training
-increase in working population

Question 8

Factors that cause PPF to shift inwards

Answer 8

-disasters such as earthquakes
-wars
-global warming
-a prolonged recession

Question 9

Define economic growth

Answer 9

an increase in the productive capacity of an economy over time

Question 10

Define productive efficiency

Answer 10

when maximum output is produced from available factors of production and when it is not possible to produce of more good or service without producing less of another

Question 11

Define allocative efficiency

Answer 11

when an economy’s factors of production are used to produce the combination of goods and services that maximises society’s welfare