Basic Economic Concepts Section

Question 1

Define economics.

Answer 1

The theories, principles, and models that deal with how the market process works. It attempts to explain how wealth is created and distributed in communities, how people allocate resources that are scarce and have many alternative uses, and other such matters that arise in dealing with human wants and their satisfaction.

Question 2

Define market.

Answer 2

A place where we buy and sell goods and services. The market for a particular item is made up of existing and potential customers who need it and have the ability and willingness to pay for it.

Question 3

Define consumer sovereignty.

Answer 3

Where the consumer ultimately decides how the resources are sed. It is where the consumer is king in deciding where resources are allocated in a market economy.

Question 4

What is opportunity cost?

Answer 4

Opportunity cost is when you are face with a decision and choose one option. your opportunity cost is the option you didn’t go for because not choosing that option brings some sort of cost your way. Eg. You have an apple and an orange. you op for the apple. your opportunity cost is all of the vitamin C you wont get from taking the apple and not the orange.

Question 5

What are the three economic questions?

Answer 5

1 - What to produce.
2 - How to produce.
3 - Who is going to receive the finished product.

Question 6

Economic resources - Land:

Answer 6

Is any natural resource.

Trees, plant, livestock, sun, wind, water, oil.

Question 7

Economic resources - Labour:

Answer 7

Is any human service, (physical or intellectual).

Question 8

Economic resources - Capital:

Answer 8

What helps build and construct goods and services.

Factories, plants.

Question 9

Economic resources - Entrepreneurship:

Answer 9

Recognises a profit opportunity.
Organises resources.
Willing to accept risk and failure.

Question 10

The difference between needs and wants:

Answer 10

Needs are things we must have to survive. Wants are things we desire but could survive easily wiht out.

Question 11

What is the concept of scarcity?

Answer 11

The fundamental economic problem of having seemingly unlimited human wants in a world of limited resources to fulfil all human wants and needs.

Question 12

Complementary and substitute products:

Answer 12

Complimentary products are product given out with no action of money or trade. And a substitute product is a product given or used in replace of the original in demand product.

Question 13

Law of demand:

Answer 13

The lower the price the higher the demand.

The higher the price the lower the demand.

Question 14

Factors that could increase the demand of a product:

Answer 14

Income in the economy.
Price change in competitive goods.
Swings in consumer preference.

Question 15

Law of supply:

Answer 15

The higher the price that can be gained for an item, the more that will be supplied and vice versa.

Question 16

Factors that could increase supply of a product, ACE:

Answer 16

Advertising.
Consumer trends.
Expectations.
Preferences.
Positive and negative publicity.

Question 17

What is equilibrium?

Answer 17

When the demand and supply are at the same point. The current price is matched to the current amount of customers that want the product.