Chapter 1.1: Understanding the nature of economics

Question 1

Social Science

Answer 1

Academic disciplines that study human society and social relationships, concerned with discovering general principles describing how societies function and are organised.

Question 2

Microeconomics

Answer 2

The branch of economics that examines the behavior of individual decision-making units, consumers and firms in the economy, the interaction of such behaviors and how resources are allocated.

Question 3

Macroeconomics

Answer 3

The branch of economics that examines the economy as a whole by the use of aggregates.

Question 4

Scarcity

Answer 4

A situation where available resources are insufficient to satisfy unlimited human needs and wants.

Question 5

Choice

Answer 5

A key concept as economics is the study of choices, or selecting among alternatives.

Question 6

Efficiency

Answer 6

The best possible use of scarce resources to avoid resource waste.

Question 7

Allocative Efficiency

Answer 7

An allocation of resources that results in producing the combination and quantity of goods and services most preferred by consumers.

Question 7

Economic Well-being

Answer 7

The level of prosperity, economic satisfaction and standards of living among the members of a society. This includes job, income, housing security, the ability to pursue one’s goals and the ability to have a satisfactory quality of life.

Question 7

Equity

Answer 7

The normative concept of fairness. The condition of being fair or just.

Question 8

Sustainability

Answer 8

Maintaining the ability of the environment and the economy to continue to produce and satisfy needs and wants into the future for future generations

Question 9

Change

Answer 9

A concept where the economic world is characterized by continuous change in institutional, technological, social, political and cultural environments.

Question 10

Interdependence

Answer 10

The idea that economic decision-makers interact with and depend on each other; arises from the fact that no one is self-sufficient.

Question 11

Intervention

Answer 11

Government intervention where the government becomes involved with the workings of markets.

Question 12

Resources

Answer 12

Factors of production, used by firms as inputs in the production process.

Question 13

Factors of production

Answer 13

All resources, or inputs used to produce goods and services; refers to the economic resources of land, labour, capital and enterprise used to produce goods and services.

Question 13

Economics

Answer 13

The study of choices leading to the best possible allocation of scarce resources in order to best satisfy unlimited human wants and needs.

Question 14

Sustainable resource use

Answer 14

The preservation of scarce resources and the environment over time.

Question 15

Land

Answer 15

A factor of production that includes all non man-made natural resources available for production.

Question 16

Capital

Answer 16

Man-made resources used to produce goods and services.

Question 17

Labour

Answer 17

A factor of production that includes the physical and mental effort that people contribute to the production of goods and services.

Question 18

Entrepreneurship

Answer 18

A factor of production that includes the special human skill to take business risks, seek new business opportunities, innovate by developing new ways of doing things and managing the other 3 factors of production.

Question 19

Human Capital

Answer 19

The skills, abilities and knowledge acquired by people, including good health, that make people more productive. Is a form of capital as it provides a stream of future benefits by increasing the output that can be produced in the future.

Question 20

Opportunity Cost

Answer 20

The value of the next best alternative forgone in order to obtain something else.

Question 21

Free Good

Answer 21

Any good that is not scarce, and therefore has zero opportunity cost.

Question 22

Economic Good

Answer 22

Any good that is scarce, either because it is a naturally occurring scarce resource or because it is produced by scarce resources. All economic goods have an opportunity cost.