The Basic Economic Problem

Question 1

The basic economic problem

Answer 1

Scarcity is the basic economic problem this is due to infinite wants but finite resources.

Question 2

Opportunity cost

Answer 2

The loss in value of the next best alternative outcome foregone

Question 3

Factors of production

Answer 3

Capital, Enterprise, Land and Labour (Cell)

Question 4

PPC (production possibility curve)

Answer 4

The PPC shows the maximum possible output combination of two goods or services that it can produced with the current amount of resources.

Question 5

The 3 questions linked with the basic economic problem are

Answer 5

1. What to produce (consumption)
2. How to produce (Produce decision)
3. For whom to produce (Distribution decision)

Question 6

Consumption decision

Answer 6

What to produce

Question 7

Production decision

Answer 7

How to produce

Question 8

Distribution decision

Answer 8

For whom to produce

Question 9

Land

Answer 9

Any natural resources used in production e.g. minerals, fossil fuels, livestock, crops and rivers

Question 10

Labour

Answer 10

The human input to production by muscle or brain, skilled or unskilled.

Question 11

Capital

Answer 11

Man-made items, which help in the production of other goods and services. E.g tools, machines and computers

Question 12

Enterprise

Answer 12

The entrepreneur is the decision maker and risk taker in the business.

Question 13

The return on Capital

Answer 13

Interest

Question 14

The return on enterprise

Answer 14

Profit

Question 15

The return on land

Answer 15

Rent

Question 16

The return on labour

Answer 16

Wages

Question 17

Consumer goods

Answer 17

Goods that satisfy wants when they are used .

Question 18

Consumer durable goods

Answer 18

Goods that satisfy a want over and over again e.g cars

Question 19

Consumer non-durable goods

Answer 19

Goods that satisfy a want once e.g cakes, fireworks

Question 20

Capital goods

Answer 20

Goods that are used to assist in the production of other goods

Question 21

Services

Answer 21

Tasks that are performed to satisfy a consumers wants. That are not physical items e.g haircut