Nature Of Economics

Question 1

What is economics?

Answer 1

The study of how society organises scarce productive resources in order to satisfy people’s unlimited wants.

Question 2

What are economic agents?

Answer 2

Any person or group of people who has an influence on the economy by producing, buying, or selling.

Question 3

What does ceteris paribus mean?

Answer 3

An assumption made in economics that all other things remain equal when analysing the relationship between two variables.

Question 4

What are positive economic statements?

Answer 4

Objective statements that can be proved or disproved; they can be verified as being true or false by reference to data or scientific approach.

Question 5

What are normative economic statements?

Answer 5

Value judgements that are subjective and relate to what should or ought to be.

Question 6

What is the economic problem?

Answer 6

All economies face the problem of scarce resources and infinite wants.

Question 7

What is scarcity?

Answer 7

The problem of scarce resources and infinite wants faced by all economies.

Question 8

What are needs?

Answer 8

Goods that are necessary for survival, such as water, food, clothing, and shelter. Needs are limited.

Question 9

What are wants?

Answer 9

Goods that are not essential for survival but make our lives more comfortable, such as a larger car or a new TV. Wants are infinite.

Question 10

What are factors of production?

Answer 10

Resources used to make goods and services, including land, labour, capital, and enterprise.

Question 11

What is land in economics?

Answer 11

All natural resources, including non-renewables like oil and copper, and renewable resources like water and forests.

Question 12

What is labour?

Answer 12

People within working age in an economy, though not all are economically active. Productivity is influenced by education and training.

Question 13

What is capital?

Answer 13

All man-made goods used repeatedly to produce consumer goods, such as machinery, tools, and equipment.

Question 14

What is an entrepreneur?

Answer 14

The person who manages all other factors of production and often risks their own money to set up a new venture.

Question 15

What are renewable resources?

Answer 15

Resources that can be replenished, maintaining stock levels over time.

Question 16

What are non-renewable resources?

Answer 16

Resources that cannot be renewed, such as those produced from fossil fuels like coal, oil, and natural gas.

Question 17

What is opportunity cost?

Answer 17

The next best alternative foregone for the option that is chosen.

Question 18

What are economic goods?

Answer 18

Goods which are scarce, known as economic goods, such as oil and gold. They carry a price reflecting their scarcity.

Question 19

What are free goods?

Answer 19

Goods that have a zero price, such as air and rainwater, which involve no opportunity cost.

Question 20

What is the production possibility frontier?

Answer 20

It represents the maximum output of any combination of two types of products that an economy can produce with its current resources and technology.

Question 21

What is a trade-off?

Answer 21

The sacrifice of the production of one good when making a decision to produce more of another good.

Question 22

What are capital goods?

Answer 22

Goods used to produce other goods or services, such as factories, machinery, and tools. They are wanted for the consumer goods and services they provide.

Question 23

What are consumer goods?

Answer 23

Goods that directly provide utility to consumers, such as smartphones, clothes, and cars.

Question 24

What is specialisation?

Answer 24

Where an individual, firm, region, or country concentrates on the production of a limited range of goods and services.

Question 25

What is division of labour?

Answer 25

Dividing the production process into a number of tasks and assigning each worker a specific task.

Question 26

What is bartering?

Answer 26

A system of exchange where goods or services are directly exchanged for other goods or services without using money.

Question 27

What is the double coincidence of wants?

Answer 27

In a barter system, a consumer must find someone who wants what they have and someone who has what they want.

Question 28

What is a medium of exchange?

Answer 28

A function of money that is acceptable to both buyers and sellers, removing the need for bartering.

Question 29

What is a store of value?

Answer 29

Money can be saved as wealth so it can be spent later.

Question 30

What is a measure of value?

Answer 30

Money provides a unit of account by pricing goods/services, allowing comparison between the relative value of products.

Question 31

What is means of deferred payment?

Answer 31

Enables borrowing and lending; someone can borrow money to buy a product now and pay for it later.

Question 32

What is a free market economy?

Answer 32

An economy where all resources are privately owned and allocated via the price mechanism, with minimal government intervention.

Question 33

What is a mixed economy?

Answer 33

An economy where some resources are owned and allocated by the private sector and some by the public sector.

Question 34

What is a command economy?

Answer 34

An economy where there is public ownership of resources and these are allocated by the government.