Booklet 1 - Scarcity and Choice

Question 1

Macroeconomics

Answer 1

the study of the inter-relationships at an economy wide level

Question 2

Microeconomics

Answer 2

the study of economic decisions made by individual economic agents, e.g. households, firms, and the government

Question 3

Positive statement

Answer 3

a statement about what it is - facts

Question 4

Normative statement

Answer 4

a statement involving judgement- what ought to be

Question 5

Ceteris Paribus

Answer 5

All other things remaining the same. Used in economics to focus on changes to one variable while holding others constant

Question 6

Scarcity

Answer 6

A situation that arises due to unlimited wants and limited resources- the basic economic problem

Question 7

Needs

Answer 7

things essential to human survival

Question 8

Wants

Answer 8

Things desired over and above basic needs

Question 9

Utility

Answer 9

Satisfaction gained from consuming a good or service

Question 10

Opportunity Cost

Answer 10

The value of the next best alternative forgone when making a decision

Question 11

Marginal Analysis

Answer 11

An approach to decision making considering the additional benefits and costs of change

Question 12

Economic agents

Answer 12

Decision makers, such as firms, households, and the government

Question 13

Free good

Answer 13

A good unlimited in supply such that there is no opportunity cost for consuming it e.g. air

Question 14

Economic good

Answer 14

A good which is scarce in supply

Question 15

Factors of production

Answer 15

Resources used in production. CELL
Capital
Enterprise 
Labour 
Land

Question 16

Land - FoP

Answer 16

Land itself and what it produces

Question 17

Labour

Answer 17

All human effort used in production- a human resource

Question 18

Capital

Answer 18

All man made aids to production e.g. machinery, buildings and transport equipment. A physical resource

Question 19

Enterprise

Answer 19

Initial idea and risk taken. Draws together the other 3 factors of production

Question 20

Renewable Resource

Answer 20

Natural resources that can be replenished, such as forests

Question 21

Non renewable resources

Answer 21

Natural resources that once used cannot be replenished e.g. coal and oil

Question 22

Economic model

Answer 22

a simplified model of reality used to provide insight into economic decisions and events

Question 23

Production Possibility Frontier (PPF)

Answer 23

A curve showing the maximum combination of goods/services a firm can produce

Question 24

A Trade-off

Answer 24

Giving up one thing in exchange for another, relates to opportunity cost, sacrificing one good or service to gain more of another

Question 25

Economic Efficiency

Answer 25

A situation where both allocative and productive efficiency is achieved

Question 26

Productive Efficiency

Answer 26

when a firm operates at minimum average total cost and produces maximum output (lies on the PPF)

Question 27

Allocative Efficiency

Answer 27

When consumer satisfaction is maximised

Question 28

Consumer Goods

Answer 28

Goods which are consumed when we buy them. For present use

Question 29

Capital Goods/Producer Goods

Answer 29

Goods manufactured for the purpose of producing another good. Increases the future capacity of the economy and are known as investment

Question 30

Potential Economic Growth

Answer 30

An expansion int the productive capacity of the economy

Question 31

Gross Domestic Product (GDP)

Answer 31

A measure of the economic activity carried out in a certain period of time

Question 32

Division of Labour

Answer 32

A process where the production procedure is broken down into a sequence of stages and workers are assigned to stages. Leads to increased output and economic efficiency

Question 33

Specialisation

Answer 33

The concentration by worker(s), firms, regions or whole economy on a narrow range of goods and services

Question 34

Market

Answer 34

A set of arrangements that allow transactions to take place

Question 35

Barter

Answer 35

Exchanging goods and services for other goods and services without using money