The basic economic problem

Question 1

Define the basic economic problem

Answer 1

There are too few productive resources to make all the goods and services that consumers need and want.
Unlimited wants and limited resources
Scarcity of resources is the basic economic problem

Question 2

Define economic goods

Answer 2

A good or service that has a degree of scarcity and therefore an opportunity cost.

Question 3

Define free goods

Answer 3

A good or service that is not scarce and is
available in abundance.

Question 4

Define the four factors of production

Answer 4

Land: natural resources used in production
Labour: human effort used in the production of goods/services
Capital: the man-made resources that are used to produce goods/services
Enterprise: the skills and willingness to take the risks required to organize productive activities

Question 5

Rewards for the factors of production

Answer 5

Land - Rent
Labour - Wages
Capital - Interest
Enterprise - Profits

Question 6

What is opportunity cost?

Answer 6

Opportunity cost is the cost of choosing between alternative uses of resources

Choosing one use will always mean giving up the opportunity to use resources in another way, & the loss of goods & services they might have produced instead