Economics

Question 1

what is a market

Answer 1

a market is any situation where potential buyers come into contact with portential sellers and there is a means of exchange. (money goods or services)

Question 2

scarcity

Answer 2

limited resources, unlimited needs and wants

Question 3

opportunity cost

Answer 3

due to the shortage or resources, choices have to be made by individuals, businesses and governments as to how resources should be best utilised. when making a decision, one of the choices has to be given up. this is the opportunity cost. the opportunity cost of going to the movies might be getting popcorn instead of an ice cream.

Question 4

resource alocation

Answer 4

the way in which land, labour, capital and enterprise are used to satisfy what we produce, how to produce and for whom to produce

Question 5

distinguish between needs and wants

Answer 5

needs are the goods and services that people believe are necessities of life in order to survive, including food, clothing, water etc. whereas the wants are goods and services that assist us to enjoy a good standard of living, to enhance your everyday life, for example phones, cars and televisions. The key point of difference is that you can’t survive without the needs

Question 6

the three basic economic questions

Answer 6

what to produce, how to produce and for whom to produce

Question 7

what to produce?

Answer 7

this is usually determinded by consumer demand. producers in business to make a profit will produce what customers will want to purchase (consumer sovereignty)

Question 8

how to produce?

Answer 8

in order to make a profit, producers will look to the most cost efficient methods of production. this may be using technology and automation

Question 9

for whom to produce?

Answer 9

generally goods and services are received by those who can afford the pay for them. the government uses taxes to provide some goods and services for everyone such as healthcare and education

Question 10

economic resources

Answer 10

land, labour, capital and enterprise

Question 11

land

Answer 11

natural resources such as water, oil and minerals

Question 12

labour

Answer 12

the people power available to work in the production process. these can be both physical effort done by humans such as builders and cleaners but also mental effort such as those provided by teachers, doctors and accountants.

Question 13

capital

Answer 13

is the machinery, plant and equiptment made by people to assist in the manufactor of goods and services, such as computers, ladders, trucks, cranes etc.

Question 14

enterprise

Answer 14

are the qualities some people possess that make them able to accurately perceive market opportunites and effectively coordinate the production process

Question 15

the law of demand

Answer 15

these things will increase or decrease the level of demand for a product or service. when the price of an item goes up, the quantity of demand by market will decrease.

Question 16

factors that change demand

Answer 16

• price
• price of substitutes
• preferences
• income
• price of complementary products
• consumer expectations
• population change

Question 17

the law of supply

Answer 17

as the price of an item increases, the quantity of that item will be supplied by producers will increase. when the price decreases producers will be less willing to supply and therefore supply will fall.

Question 18

factors that change supply

Answer 18

ACE
availability of resources
*available labour force
*new discoveries of raw materials
*weather conditions and natural disasters
cost price of the inputs being used
*changes in tax rates
*changes in wage rates paid to employees
*changes in the cost of raw materials
efficiency of resources
*increased training for workers
*new machinery and technology
*new production methods to reduce the amount of waste

Question 19

equilibrium prices

Answer 19

the price where consumer demand equals the supply of goods; where the demand and supply lines intersect

Question 20

why the government may need to intervene in the economy

Answer 20

to ensure that everyone can access goods and services that are necessities to life. the government may also intervene in certain markets to increase the number of satisfied consumers

Question 21

excise tax

define

Answer 21

is an indirect tax - it’s a tax that is paid to the goverment, usually by the producer, but it is passed on to the consumer as part of the price of a good or service

Question 22

excise tax

why the government would impose this

Answer 22

they are used to discourage the consumption and production of socially undesirable goods that cause harm to society and individuals, and add to the health costs paid by the goverment

Question 23

excise tax

what products have the tax applied

Answer 23

alcohol, tobacco, fuel, and pertoleum products

Question 24

what is a good

Answer 24

a good are tangiable items you can physically touch

Question 25

what is a service

Answer 25

activites people do for others in return for payment e.g. plumbing, building

Question 26

define economics

Answer 26

is the study of how decisions, outcomes and activities that occur as a result of scarcity. it’s how society uses its limited resources to satisy unlimited needs and wants through the production of goods and services

Question 27

what is a stakeholder

Answer 27

anyone who is affected or could be affected by an action or decision. this could be an individual, a business, governments or anyone with a stake or a vested interest

Question 28

unintended consequence

Answer 28

are outcomes that are not the ones forseen and intended by an action or decision. these outcomes could be positive or negative

Question 29

potential consequences of implementing a sugar tax

Answer 29

• buy alternatives such as sugary foods
• could turn to other less favourable products like alochol
• job losses due to down turn in sugar trade
• consumers stockpiling or buying in bulk
• increase in theft as drinks become more expensive

Question 30

benefits of a sugar tax

Answer 30

• raise funds to go into healthcare (500m)
• health benefits: obesity decreases, type 2 diabetes decreases, decrease dental issues
• decrease health costs to the health system ($1B)
• companies might start making healthy alternatives

Question 31

costs of a sugar tax

Answer 31

• companies loosing profit and going out of business
• losses for sugar cane farmer ($2billion)
• consumers have to pay more for the beverages