Theme 1.1

Question 1

What is Behavioural Economics

Answer 1

Using elements of psychology to better understand decision-making by investors and consumers

Question 2

What is Ceteris Paribus

Answer 2

The assumptions that all other factors remain constant

Question 3

What is an Economic Model

Answer 3

A simplified representation of economic processes.

Question 4

What is Microeconomics

Answer 4

The study of economics at the level of the individual firm, industry or consumer

Question 5

What is a Normative Statement

Answer 5

An opinion of what ought to be. They are subjective and carry value judgements

Question 6

What is a Positive Statement

Answer 6

A statement that can be tested to see if it’s incorrect.

Question 7

What happens if a Positive Statement is proven incorrect

Answer 7

It is falsified

Question 8

What is a Value Judgment

Answer 8

A view of the rightness or wrongness of something

Question 9

What is the Economic Problem

Answer 9

We have unlimited wants but limited resources

Question 10

What is Barter

Answer 10

The practice of exchanging one good or service for another without using money

Question 11

What is a Capital Good

Answer 11

Physical assets or resources that are used in the production of goods and services

Question 12

What is an Economic Agent

Answer 12

A participant in an economic system (a consumer, business or government)

Question 13

What is an Entrepreneur

Answer 13

An individual who takes a financial risk in order to make a profit

Question 14

What are Factor Incomes

Answer 14

The rewards to the factors of production

Question 15

What is the Factor Incomes of the Factors of production

Answer 15

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

Question 16

What are the Factors of Production

Answer 16

Land
Labour
Capital
Enterprise

Question 17

What are Free Goods

Answer 17

Goods which don’t use up any factor inputs when supplied. They have no opportunity costs.

Question 18

Factors of Production
LAND

Answer 18

Natural resources available for production

Question 19

Factors of Production
LABOUR

Answer 19

The human input into the production process

Question 20

Factors of Production
CAPITAL

Answer 20

Goods used in the supply of other products

Question 21

Factors of Production
ENTERPRISE

Answer 21

Entrepreneurs organise factors of production and bring products to the market

Question 22

What are Inputs

Answer 22

Resources used in the production of goods and services

Question 23

What is Interest

Answer 23

The reward to of having capital

Question 24

What are Needs

Answer 24

An essential for survival (food, water, shelter )

Question 25

What are Wants

Answer 25

Something desirable but not essential (designer clothes, expensive meals out, sports car)

Question 26

What are Non-Renewable Resources

Answer 26

Resources which are finite

Question 27

What are Renewable Resources

Answer 27

Resources that are replaceable if the rate of extraction is less than the natural rate

Question 28

Examples of Non-Renewable Resources

Answer 28

- Fossil Fules - Minerals

Question 29

Examples of Renewable Resources

Answer 29

- Solar Energy - Oxygen - Trees

Question 30

What is Scarcity

Answer 30

A limited amount of resources available to produce goods and services.

Question 31

What is Allocative Efficiency

Answer 31

Where resources are distributed in a way that maximises overall social welfare

Question 32

What are consumer goods

Answer 32

Goods bought and used by consumers and households.

Question 33

What is Economic Efficiency

Answer 33

Making the best/optimum use of our scarce resources so economic and social welfare is maximised over time.

Question 34

What is an Opportunity Cost

Answer 34

The cost if giving up the next best alternative

Question 35

What is a Production Possibility Frontier (PPF)

Answer 35

Shows the maximum possible output combinations of two goods and services an economy can achieve (when all resources are full employed)

Question 36

What is Economic Growth

Answer 36

An increase in the productive potential of a country

Question 37

How is Economic Growth shown on a PPF

Answer 37

An outward shift

Question 38

What is Productive Potential

Answer 38

The amount of output an economy could produce if all its resources were fully and efficiently employed

Question 39

What is a Trade-Off

Answer 39

The process of choosing between two or more alternative courses of action