Scarcity and Choice

Question 1

Define positive economics

Answer 1

Dealing with the objective or scientific explanations of the working of the economy

Question 2

Define normative economics

Answer 2

Dealing with prescriptions or recommendations based on personal value judgements ( a statement of opinion or belief )

Question 3

Define factors of production

Answer 3

The resources used by firms in the production process. They are the inputs to the production process.

Question 4

Define land

Answer 4

Natural resources, owners of land receive rent for their services

Question 5

Define labour

Answer 5

The workforce of the economy, physical and mental effort expended by humans, owners of labour often receive a wage or salary for their services

Question 6

Define capital

Answer 6

Man made resources not wanted for their own sake but for what they contributed to output, owners of capital receive interest for their services.

Question 7

Define enterprise

Answer 7

The decision-making and risk-taking factor - how all the other factors are brought together, the reward they receive for their services is often profit.

Question 8

Define factor rewards

Answer 8

The income earned by the owners of the factors of production, for their use

Question 9

Define consumer goods (durable)

Answer 9

Goods that can be used repeatedly and for a long time

Question 10

Define consumer goods ( non-durable )

Answer 10

Single-use goods are goods that are used very soon after they’ve been purchased

Question 11

Define capital goods

Answer 11

Purchased by business to be used in the production of other goods and services

Question 12

Define commercial services

Answer 12

Services to industry such as banking and finance

Question 13

Define direct services

Answer 13

Services to the public such as hairdressing, valeting, retail, dentist.

Question 14

Define public services

Answer 14

Services provided by the state such as health, education, police and the emergency services

Question 15

Define by-products

Answer 15

Unintended outputs of a production process

Question 16

What are the 4 factors of production

Answer 16

Land
Labour
Capital
Enterprise

Question 17

What are the 2 types of consumer goods

Answer 17

Durable goods and non durable goods

Question 18

What is the difference between wants and needs

Answer 18

Needs are necessary to survival, wants are those things that we desire, but can do without

Question 19

What are the 5 basic needs

Answer 19

Warmth, shelter, food, clothing and water

Question 20

What are resources

Answer 20

We refer to them as the factors of production

Question 21

What is an economy

Answer 21

A system that seeks to deal with the basic economic problem and allocate scarce resources

Question 22

What are the 3 main types of economic systems

Answer 22

The market economy / capitalist economy
The centrally-planned economy / command economy
The mixed economy

Question 23

What is the free market

Answer 23

Resources are allocated through the price mechanism without any government interference

Question 24

What is the centrally-planned economy

Answer 24

All resources belong to the state, there is no freedom of ownership, all factors of production owned by the state

Question 25

What is the mixed economy

Answer 25

A mix of the free market and centrally planned economy

Question 26

Define opportunity cost

Answer 26

The satisfaction lost from the next best alternative forgone

Question 27

What is a free good

Answer 27

A good that has no opportunity cost / doesn’t require a sacrifice

Question 28

What are economic goods

Answer 28

Goods that have an opportunity cost

Question 29

Define production possibility frontier (PPFs)

Answer 29

A diagram that illustrates the maximum amount of one good that can be produced given a certain amount of another good, when all resources are being fully and efficiently utilised.

Question 30

What is the area inside the PPF

Answer 30

Attainable and undesirable

Question 31

What is the area outside the PPF?

Answer 31

Desirable and unattainable

Question 32

What is a point on the PPF

Answer 32

Attainable and desirable

Question 33

Define specialisation

Answer 33

A situation where individuals or firms or regions or nations concentrate upon producing a small range goods and services

Question 34

Define division of labour

Answer 34

Occurs when the production process of a good or a service is divided into a number on individual operations and each operation is the special task of one worker

Question 35

How to work out labour productivity

Answer 35

Output per time period divided by number of employees per time period

Question 36

What are the advantages of division of labour?

Answer 36

``` More efficient No times wasted moving jobs Saving time in training operatives Makes possible a much greater use of machinery Saving of skill ```

Question 37

What are the disadvantages of specialisation?

Answer 37

Monotonous tasks Loss of craftsmanship Workers are trained to do only one task Interdependence

Question 38

What are the functions of money?

Answer 38

A medium of exchange A store of value A unit of account A standard of deferred payment

Question 39

What are the characteristics of money

Answer 39

``` Portable Acceptable Durable Divisible Limited Extremely difficult to forge/copy Recognisable ```