TOPIC 1

Question 1

Define scarcity

Answer 1

A situation where there is not enough resources to satisfy everyone’s wants

Question 2

Define the economic problem

Answer 2

Unlimited wants exceed finite resources

Question 3

Define “factors of production”

Answer 3

The economic resources of land, labour, capital and enterprise

Question 4

Describe land (characteristics, examples)

Answer 4

Natural resources needed in the production process.

Examples include things found under the land such as minerals, on the land such as forests.

It can be destroyed or improved over time, and supply can change a lot.

Most of it is occupationally mobile but not geographically mobile.

Question 5

Describe labour (characteristics, examples, what it depends on)

Answer 5

Human resources/effort needed in the production process.

Includes all physical and mental power (human effort) used to make goods and services

Also known as human capital

Dependent on.. `age structure and size of population, retirement and school leaving age, attitude to working women

Question 6

Describe capital (characteristics, examples)

Answer 6

Manufactured resources needed in production process.

They are wanted for what they can produce.

Examples include machinery and factories

Investment: buying of capital good. They allow economies to grow over time

Question 7

Describe enterprise (characteristics, examples, functions)

Answer 7

Skill of a person that combines the other three FOPs and ensure that they are well used

They are willing to make decisions and bear risks.

Functions of an entrepreneur include production planning, organising FOPs, rewarding FOPs, and taking responsibility on production

Question 8

State the payments of the FOPs

Answer 8

Land - Rent
Labour - Wages/salary
Capital - Interest
Entrepreneur - Profit

Question 9

How can each FOP increase in quantity?

Answer 9

Land: build more high rise buildings, reclaimed land
Labour: immigration of skilled people
Capital: make more investments
Enterprise: encourage more startups

Question 10

How can each FOP increase in quality?

Answer 10

Land: use of fertilisers
Labour: education and training
Capital: innovation, research
Enterprise: more opportunities, promotions and training

Question 11

Define consumer

Answer 11

People/firms who need and want goods and services

Question 12

Define producer

Answer 12

Firms/people who use resources to satisfy consumers’ needs and wants

Question 13

Define opportunity cost

Answer 13

The next best alternative forgone

Question 14

Define economic good

Answer 14

Goods that require resources to produce it and HAS OPPORTUNITY COST

Question 15

Define free good

Answer 15

Goods that do not require resources to produce them and do not have opportunity cost.

Question 16

What is a production possibility curve?

Answer 16

PPC is a diagram that illustrates the maximum output of two types of products, and shows the combination of those products that can be produced with existing resources

Question 17

When does opportunity cost occur?

Answer 17

It occurs when we choose how to allocate resources to the production of different goods and services.

Question 18

Why is opportunity cost important?

Answer 18

It emphasises that people have to consider what they are sacrificing. Governments need to make decisions on what to spend their tax revenue on.

Question 19

Why would a PPC shift inwards?

Answer 19

1. War
2. Natural disaster
3. Epidemic
4. Large scale of destruction of FOPs

Question 20

Why would a PPC shift outwards?

Answer 20

Increase in resources