Term 1, 2021

Question 1

Want

Answer 1

a good or service beyond (surplus) to our needs, which we gain satisfaction from.

Question 2

4 Factors of Production

Answer 2

Labour, Capital, Land, Enterprise

Question 3

Land

Answer 3

natural resources

Question 4

Labour

Answer 4

mental and physical human input

Question 5

Capital

Answer 5

man-made resources

Question 6

Enterprise

Answer 6

risk-takers who initiate and manage production by combining the other 3 FoP in attempt to make a profit

Question 7

Economic Problem

Answer 7

Limited Resources + Unlimited Wants = Scarcity

∴ Choice

Question 8

4 Questions an Economy must address

Answer 8

What to produce?
How to produce?
For whom to produce?
How much to produce?

Question 9

Opportunity Cost

Answer 9

is the value of the next best alternative foregone when a choice is made.

Question 10

Who makes Economic Decisions?

Answer 10

Consumers

Producers

Government

Question 11

Consumer Sovereignty

Answer 11

consumer needs and wants determine the production of goods and services.

Question 12

Production Possibility Curve/Frontier

Answer 12

represents all the different output variations of an economy at its maximum production potential.

Question 13

Assumptions of a PPC/PPF

Answer 13

All available resources are used

There are only two goods/services produced

Resources can be allocated to either good/service

Resources and Technology are fixed/constant

Question 14

Allocative Efficiency

Answer 14

allocating resources to produce maximum benefits for the producer, consumer and country.

Question 15

Productive/Technical Efficiency

Answer 15

production is at a maximum whilst at the lowest average cost (spot on the PPC/PPF)

Question 16

Productivity

Answer 16

a measure of efficiency for production expressed as a rate of output per unit of input.

Question 17

Capitalist Economy

Answer 17

an ideology based on the market system, private ownership and limited government intervention. It believes the economy can thrive through individual motives. (free enterprise) (e.g. USA)

Question 18

Mixed Economy

Answer 18

an economy that utilizes both government intervention and the market system. (e.g. Australia)

Question 19

Socialist Economy

Answer 19

an ideology based on publicly owned production to benefit the whole community. (e.g. modern-day China)

Question 20

Subsistence Economy

Answer 20

an economy with no market and mostly production for individual use. (e.g. remote Arctic regions)

Question 21

Economic Model

Answer 21

a simple illustration of a complex, real-world situation

Question 22

Ceteris Paribus

Answer 22

A Latin phrase meaning ‘all other things being equal’

Question 23

GDP (Aggregate Demand) Equation

Answer 23

Consumption + Investment + Government Expenditure + (Exports - Imports)

C + I + G + (X - M)

Question 24

Savings

Answer 24

Household income saved for the future (e.g. saving money in the bank)

Question 25

Investment

Answer 25

Producer creation of goods not for current consumption, but for future profit (e.g. buying a new factory)

Question 26

GDP

Answer 26

The measure of the monetary value of the final goods and services a country produces. It is a measure of economic health.

Question 27

Aggregate Supply

Answer 27

The total value of goods and services produced and available in an economy in a given period of time.

Question 28

Demand

Answer 28

The amount of a good or service that consumers are willing and able to buy at a given price.

Question 29

Law of Demand

Answer 29

There is an inverse relationship between price and quantity demanded. For example, if the price increases, consumers demand less.

Question 30

Determinants of Demand

Answer 30

``` Income Number of buyers (population) Substitute goods (competitive wants) Expectations (confidence) Complementary goods (cheaper pencils increase demand for rubbers) Tastes ```

Question 31

Supply

Answer 31

The amount of a good or service that producers are willing and able to sell at a given price.

Question 32

Law of Supply

Answer 32

There is a positive relationship between price and quantity supplied. For example, if the price increases, producers supply more.

Question 33

Determinants of Supply

Answer 33

``` Alternative goods (farmer grows cotton instead of wheat) Unexpected events Number of sellers Technology Cost Joint supply (cow for beef and hide) ```

Question 34

Price Elasticity of Demand

Answer 34

The responsiveness of quantity demanded to a change in price.

Question 35

Determinants of Elasticity

Answer 35

Many substitutes (unessential) Large part of the budget (expensive) Luxury good

Question 36

Determinants of Inelasticity

Answer 36

Few substitutes (essential) Small part of the budget (inexpensive) Necessity or habit

Question 37

Relative to 1

Answer 37

PED < 1 = Relatively Inelastic PED = 1 = Unit Elasticity PED > 1 = Relatively Elastic

Question 38

Formula for Elasticity

Answer 38

[(new Quantity - old Quantity) / old Quantity] / [(new Price - old Price) / old Price]

Question 39

Characteristics of Wants

Answer 39

Wants are unlimited Wants are recurrent Wants are complementary Wants are competitive Wants are habitual Wants are alternative