Chapter 1 - The Nature of The Economic Problem

Question 1

What are wants?

Answer 1

Wants are desires for goods and services which are not essential for survival.

Question 2

What are needs?

Answer 2

Needs are goods and services that are absolutely essential for survival.

Question 3

What are resources?

Answer 3

Resources are the inputs required to produce goods and services (factors of production). Eg: Land, labour, capital, entrepreneur.

Question 4

What is “The Basic Economic Problem”?

Answer 4

Wants are unlimited, but resources are limited, leading to the problem of scarcity. This, in turn, creates a problem of choice.

Question 5

What is opportunity cost?

Answer 5

Opportunity cost is the cost of the next best alternative foregone.

Question 6

What are free goods?

Answer 6

• Free goods are goods that do not require resources to produce.
• No opportunity cost.
• Free of cost.
• Gift of nature.
• Unlimited in supply.
• Air, sunlight are some examples.

Question 7

What are economic goods?

Answer 7

• Goods that require resources to produce are economic goods.
• Involve opportunity cost.
• Can be consumed by paying a price.
• Man-made goods.
• Education, healthcare are some examples.