Basic ideas and resource allocation

Question 1

fundamental economic problem

Answer 1

scarce resources but unlimited wants a.k.a the basic economic problem

Question 2

factors of production

Answer 2

resources or inputs available in an economy that are used in the production of goods and services

Question 3

opportunity cost

Answer 3

cost expressed in terms of what the next best alternative that is foregone when a choice is being made

Question 4

macro-economies

Answer 4

study of an economy or a group of economies

Question 5

micro-economies

Answer 5

study of individual markets (households and firms)

Question 6

positive statement

Answer 6

statement based on evidence or fact, not opinion or value judgement of the economists

Question 7

normative statement

Answer 7

statement based on the economist’s opinion or value judgement and cannot be proven

Question 8

ceteris paribus

Answer 8

other things equal - or unchanged - used by economists to model effects of one change at a time

Question 9

short run

Answer 9

time period in which a firm can change at least one but nit all factor inputs

Question 10

long run

Answer 10

time period when all factors of production are variable but with a constant

Question 11

very long run

Answer 11

time period when all key inputs into production are variable

Question 12

land

Answer 12

a factor of production, natural resources in an economy

Question 13

labour

Answer 13

a factor of production, human resources available in a country

Question 14

enterprise

Answer 14

a factor of production, involves organizing production and taking risks

Question 14

capital

Answer 14

a factor of production, a physical resource made by humans to aid the production of g+s

Question 15

physical capital

Answer 15

factors of production like machinery, buildings and infrastructure

Question 16

human capital

Answer 16

the value of labour to the to the productive potential (future growth) of an economy

Question 17

economic growth

Answer 17

in the short run, an increase in a country’s output + in the long run, an increase in a country’s productive potential

Question 18

specialisation

Answer 18

the process by which individuals, firms and economies concentrate on producing those g+s where they have an advantage over others

Question 19

division of labour

Answer 19

manufacturing process is split into a sequence of individual tasks

Question 20

entrepreneurs are individuals who:

Answer 20

• organise production by putting together various factors of production to form a business opportunity
• prepared to take risks but using own money/borrowing from banks or other people to try achieve their ambitions. If plans fail, they will lose that money

Question 21

successful entrepreneurs skills:

Answer 21

• are leaders
• make business opportunity by putting together factors of production
• are prepared to take risks
• are creative + innovative to produce something valueable in the market
• produce something the market wants
• anticipate current + futre needs
• may have good luck or good fortune
• makes the right decisions

Question 22

economic system

Answer 22

the way in which production is organised + choices are made in an economy

Question 23

market mechanism

Answer 23

resoucre allocationdecisions are taken by individuals, producers and consumers with no government intervention a.k.a. price mechanism

Question 24

market economy

Answer 24

an economic system where most decisions are taken through the market mechanism

Question 25

planned economy

Answer 25

an economic system where resources are state-owned + allocated by a certain body

Question 26

productive resources

Answer 26

resources available to be used

Question 27

mixed economy

Answer 27

an economic system where both market forces + gov are involved in resource allocation decisions

Question 28

private sector

Answer 28

the part of an economy under private ownership

Question 29

public sector

Answer 29

the part of the economy under govt ownership